Bulls Circle the Wagons

Blame bargain-hunters or program-traders working to capture returns on the volatility, but the market has resisted a repeat of last week's dramatic drop despite a deepening of the same bad news that sparked it.

"The market is trying to claw its way back into neutral territory on a day that had every right to be a huge down day," says John Bollinger, president of Bollinger Capital. "I'm impressed by the market's resistance to going down here."

Then again, one could just as easily say about Monday that the market just can't sustain a bounce, no matter hard investors try. It's partly a question of perspective. Indeed, some say the complacent mood in the market is part of why the market sold off to begin with. Investors were anxiously seeking a reason to sell off and many are calling the recent decline "healthy."

On the other hand, bulls would argue the market had a right to tank Monday because the Nikkei, the Hang Seng and the Shanghai Composite fell 3.3%, 4% and 1.6%, respectively. Europe's markets also ertr falling. The FTSE 100 fell 1.9% and Germany's DAX declined 2.2%. Likewise, investors awakened to perhaps the worst news yet from the subprime mortgage-lending front.

Subprime mortgage lender New Century Financial(NEW Quote) fell 68.9% on the company's report that the U.S. Justice Department is investigating its accounting and stock trading. Questions about its solvency started to swirl. Likewise, Fremont General(FMT Quote) sent many of its employees home on paid leave and said it will not originate any new subprime mortgages. Its stock fell 32.4%.