Week-In-Review: Stocks Bounce Back From Deeply Oversold Levels
The market bounced last week from deeply oversold levels and investors digested a slew of earnings and some economic data. For the past two weeks, I have repeatedly said the market is oversold and due to bounce. I did not know the market would bounce as much as it did but that is what happens in deeply oversold markets. Why? Because you have two concurrent forces at play: First you get a lot of short covering (people who are short have to buy their positions back if they want to exit their shorts) and second you get the buy the dip crowd that shows up. Now the key is to see if this bounce can continue or if it is another short-lived rally in a longer downtrend.
