Bulls Trample Fearful Futures

Part of the gloom stemmed from selloffs that swept overseas markets. The big indexes in Asia slumped, with Japan's Nikkei dropping 3.3% and Hong Kong's Hang Seng sliding 4%. Big indexes in Europe dropped between 0.5% and 1%.

Another negative factor was the specter of recent selling. Last week, the Dow tumbled 4.2% and the S&P 500 dropped 4.4%. The Nasdaq plummeted 5.9% to notch its biggest weekly percentage loss since August 2004.

The scene was set for a repeat of last Tuesday's selloff, which took the Dow down 416 points.

After a brief Monday morning tumble, though, each of the U.S. indices bounced back, despite a disappointing report from the Institute for Supply Management.

"The increase in premarket volatility and the reaction from overseas losses on a day-to-day basis could be considered non-indicative of how the U.S. markets will trade," says Hyman, equity market strategist with EKN Financial. "Once this rally started, futures became irrelevant."

A similar scenario unfolded last Thursday, when the futures predicted a sharply down open and stocks rallied early into the trading day on solid economic data.

Paul Mendelsohn, chief investment strategist with Windham Financial, says that the futures market reflects the selling that has been coming in from overseas, but fails to take into account U.S. buyers that are hunting for bargains.