Like John Travolta in the movie Saturday Night Fever, the market was rockin to that old familiar 70's hit "Stayin Alive" by the Bee Gees today. But it'll take a couple of more verses before it's safe to join it on the dance floor.

The S&P moved back up and stopped right below the 850 level, which is now resistance. It'll need to reclaim that and more if it wants to keep dancing with the bulls. Tomorrow should give us some good input into whether the market really has bottomed for now.

It could go either way, it really could. It could easily collapse back to the 2002 lows tomorrow from below this resistance if it wants to. It's certainly still overbought enough. It also could make a beeline for 900. I'm not going to be surprised by either outcome.

I do believe that a big rally tomorrow has a better chance of reversing during the day than a big move down has of recovering intra day.  Does that make sense? The reason is that the market is overbought and any strong move up from here will cause it to become even more overbought. 

As a result, I'd sell into any strong move up, but not buy into weakness unless the 740-750 were approached again. The most bullish action would be a consolidation just above 850 for a few days to burn off these overbought conditions. Keep an eye out for that unlikely development.