Stocks Bounce From Oversold Levels

The market is nicely higher in early trading, as news of the effort to cool the nuclear plans in Japan intensifies. There were photos of military helicopters dropping water on the reactors, although it appeared much of it was dispersed by the wind. The temporary power lines are said to be closer to completion as well.

The Yen continues to rally, at the expense of the dollar. The weak dollar is helping boost most commodities. Gold is one of the few that is lower today, falling back to $1393. And oil prices have rallied back to the $100 level.

In economic news, the Philly Fed index surged to a 25-year high of 43.4. We have stated that the manufacturing sector has been a surprising area of strength, and this report certainly supports that notion.

In corporate news, Fedex (FDX) reported earnings and offered a strong forecast. That news is helping boost its shares more than 5%, and improving sentiment in the transportation sector.

Despite the efforts in Japan, radiation concerns weighed on sentiment overnight and led to losses in Asian markets. But Europe was higher this morning.

The 10-year yield is higher to 3.27%; and the volatility index (VIX) is down -12% after yesterday's huge spike, back to a still lofty 25.91.

Trading comment: I have commented on how oversold the market is, but you never know how far back the rubber band will be pulled. Today we are getting a snapback, with the markets rallying strong in the early hours. Hopefully the strength will hold up into the close, and be accompanied by some volume.

Corrections don't end overnight, so today probably is not the day to do your buying. Most likely, the market will rally up to some resistance levels, such as the now overhead 50-day moving average of the S&P 500 around 1300, and then come back down again. That is often the pattern that creates a more solid trading bottom. So that's the playbook we're working from.