Editor's Note: This is a special bonus column for TheStreet.com readers; it was published on RealMoney.com at Wednesday's close. Rev Shark's commentary regularly appears on RealMoney.com. To sign up for RealMoney, where you can read his commentary every day in real time, please click here for a free trial.
File Wednesday afternoon's action under textbook examples of snapback rallies. That was a classic. In the early afternoon, the gloom was thick enough to cut with a knife. After one last stab at new lows for the year, the bulls finally found a slight toehold. They then slowly inched the indices back up, and as soon as they took out the midday highs, it was off to the races.
Buy programs, intraday traders and short-covering poured in and helped fuel the move. Before you knew it, the
Dow Jones Industrial Average
had reversed into positive territory after being down almost 170 points. But that is now history, and the question is, where do we go from here?
One of the positives of this sort of giant intraday swing is that it tends to wash out the weak holders who weren't sure whether to hold on to positions or not. The dip-buyers tend to be a bit more secure, since they aren't sitting on the big losses the sellers tend to have, and therefore help create some downside support.
The chances of some follow-through to the upside look fairly high, due to the swing in psychology and emotion that this big snapback will generate. But there is still plenty of technical damage and overhead resistance to deal with.
I continue to feel quite stronger that there will be plenty of time to buy your favorite stocks in the weeks ahead. This sort of intraday reversal is a good start in the bottoming process, but it is just a first step that needs further confirmation.
If, and that is a big if, a meaningful low is hit, we should start seeing a much better supply of long setups within the next few days. I can tell you right now, this market is going to take some hard work if we want to extract gains.
James "Rev Shark" De Porre is a self-taught trader who primarily trades for his own account from his home on Anna Maria Island, Fla. He is a member of the Michigan Bar Association and a former tax attorney and CPA. De Porre holds business and law degrees from the University of Michigan. He was formerly the host of America Online's The Shark Attack and presently operates SuperTraders.com. At the time of publication, he did not have any positions in any of the stocks mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback and invites you to send your comments to