Few were positioned properly for yesterday's rally as bearish sentiment has spread in recent weeks. I believe that the under invested will provide a bid to the market on pullbacks. The market will likely rally into Fourth of July weekend as we are oversold and sentiment is too bearish.
The sentiment surveys, oversold readings and the put/call ratios all point to levels of negative sentiment that have typically led to rallies. One day of rallying does not relieve the bearishness that has been built up over the course of seven weeks. The reason I believe we will rally into Fourth of July weekend is because we will not be overbought until that point. Additionally, turn of the month seasonality is typically positive, which works out to the days leading into Fourth of July weekend.