Can Stocks Add To This Bounce?

The market has enjoyed a nice rally today, and the Nasdaq is up more than 3% heading into the last hour of trade. The bullish sentiment carried over from both Asia last night, and Europe early this morning. Both regions saw equity market rallies from oversold levels.

The dollar is lower today, but commodities are mixed. Oil is rallying back near $86, and energy stocks are leading the action so far today. Gold prices are finally seeing a down day, with the yellow metal off more than $50 today near $1837.

Financials are lagging the action, as BofA remains under pressure, and Goldman (GS) can't seem to rally today either. Volume in GS is very high again today.

If short-covering continues, there could be continued buying pressure into the close. The real question is whether or not this turns out to be a one-day wonder, or if this rally can carry the markets higher.

The 10-year yield hasn't rallied much, hovering at a still low level of 2.13%. And the VIX is down 12% currently, falling below the 40 level to 37.18 as of now. That's a good start. I would like to see it break its rising 20-day average which will come into play around 33.50, but bulls would really like to see it below 30 again.

Trading comment: While it "feels" good today, I am still not convinced the bottom is in. I hope I am wrong, but my concern is that expectations are too high going into the Jackson Hole meeting on Friday. If Bernanke doesn't come out with something big, I think the markets could sell off again. As such, I am using today's strength to continue to lighten up a little on economically sensitive stocks and add to our index hedges.