NEW YORK (TheStreet) -- The indexes had a gap-up open on Monday and finished near the highs of the day. This did not come without anxiety this afternoon as the Nasdaq and Russell 2000 indexes slipped into red territory at 3:00 p.m. EDT.
The DJIA closed up 146.49 points at 16173.24 and the S&P 500 closed up 14.92 at 1830.61. The Nasdaq gained 22.96 to 4022.49 after being lower and the Russell 2000 gained 3.92 to 1115.35 after being in the red as well this afternoon.
What this means is all the inde-es had an oversold bounce within a Trend Bearish formation. Again, Trend Bearish is a three month or longer time frame. The levels are developed according to an internal algorithm process.
As I wrote Friday, I was looking for the a relief rally that would begin early this week. The fact that it happened on a gap-up open came as no surprise. The algorithm-programmed machines are in control of this market. They have the internal numbers that say when the indexes are oversold and when they should be bought.
Once again, however, the volume on this relief rally on Monday was much less than desirable. The S&P 500 ETF (SPY) volume was approximately 44 million shares lower than last Friday. In other words, this was a classic dead cat bounce with less volume than the 50-day moving average. As I have been consistently writing about, the green up day volume is much lower than the red down day volume. It matters in the bigger picture.
So, where does this market go from here? I would expect nothing more than another day or so of upside. And that is if we get that. We can very well have the indexes resume their downward trajectory tomorrow. Make no mistake about it, and let me be very clear. This market has gone through a character change. We are no longer in the buy-the-dip mentality.
As far as I am concerned, this market did not get to the necessary oversold level that it needed to get to for a better, more sustained rally to the upside. The markets would have been in much better shape if they had opened to the downside and had an intraday turn to the upside.
With that being said, if you are a trader I would continue to be patient and not chase this rally. Opportunities to go long will present themselves with much better and lower prices.
I did no buying today at all and continue to sit in cash. That has been the next best position to be in, unless you are trading this market from the short side.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.