Market Preview: Oversold or Underbought?

NEW YORK (TheStreet) -- Tuesday was a strange session. The banks led the market higher, Apple(AAPL) disappointed the faithful, and news of a major European bank at the brink was somehow a good thing.

Federal Reserve Chief Ben Bernanke didn't really veer from the script in testimony on Capitol Hill but it still seems notable that he told legislators the U.S. economy's recovery is "close to faltering" and stocks were able to recover anyway. The buyers that crashed the party in the last hour of trading are evidently putting a lot of stock in reports of talks that Europe's leaders are looking for ways to cooperate on recapitalizing banks across the pond.

Hardly concrete with a plethora of moving parts to boot. And since these leaders have been talking all along and seemingly made very little progress on anything so far, it's advisable not to get too carried away in thinking that the contagion will be contained. No details on how this helps Greece yet either. For what that's worth. There's also the view that traders took some solace in the idea that Belgian bank Dexia is going to go the "bad bank" route, maybe providing a template for how a crisis will be averted in the old country. Excuse Citigroup(C) shareholders if they don't stand up and cheer.

The S&P 500 made a brief foray into bear market territory, and caught a bounce as most strategists were expecting at some point, given the devastation wrought on stocks in the third quarter, and Monday's ignominious start to the fourth quarter.

The action was choppy in part because there's a lull in corporate news right now with earnings season not to set to begin in earnest for another few weeks, so a pessimist might say the banks caught a well-timed bounce with the FT report and were able to snap back on little substance, taking the broad market along with them. Holding those gains through Wednesday's session may prove more of a challenge, and we may yet see Bank of America's(BAC) share price dip below its $5 per month debit card fee. Late-night television hosts and other practitioners of snark are undoubtedly crossing their fingers in hope.