Don't Get Too Comfortable in That Bear Sleeping Bag

Bears who were looking for an abrupt drop back down to last week's lows on the S&P and Nasdaq (if not much lower) are in a rather tough spot this morning, as some positive AAPL/China trade war news is the excuse du jour to send the Dow up nearly 500 points as I write this. 

The two main issues undermining the imminent bear case this week, however, seem to be playing out in favor of bulls now. They were 1) The sudden uptick in extreme negative sentiment, which often serves as a contrarian bullish sign, and 2) Yesterday's selloff occurred on light sell volume with plenty of growth stocks barely suffering damage, if at all, in terms of their chart structures. 

As a result, we have a powerful morning rally with the Nasdaq up 2.35% as I write this. As expected, gold miners are cooling off and likely in the process of resetting a few days before another potential long entry. 

The critical piece of this puzzle now is likely Treasuries. If stock bulls are to enjoy a sustained rally beyond a spirited morning, we almost assuredly need to see TLT continue to back off not only 52-week highs but highs dating back three summers ago, to 2016. If we see TLT below $142, then $140, in the coming days and weeks I suspect it will give equity bulls ample ammunition to pounce on the negative sentiment for a reversion rally. 

Of course, we simply chop out the rough months of August and September. But first thing first: Bulls have initially stopped the bleeding on the major averages and are trying to keep a lid on a runaway bond market.