Just a quick note about Tuesday’s action and what Wednesday likely holds…

In short, no surprises. The bulls, sympathetic bargain hunters, were active early in the day, but when push came to shove (i.e. when the buyers had to commit to those stocks overnight), the dip into the red late in the day said these buyers weren’t totally confident with the market just yet.

There’s an irony to it as well. After the closing bell rang, Yahoo’s (YHOO) Q4 numbers came in better than expected. The company earned 11 cents per share - in line with estimates – versus the loss of 22 cents per share for the same quarter a year ago. The current quarter’s outlook was encouraging too…. an expectation for a 3% increase in revenue.

As for what this means for Wednesday, I think the buyers are going to be active again – maybe even more so than Tuesday. I’m still not buying into it though, no matter how hot it looks during the day (or maybe even the week). Remember, we’ve yet to see a good, healthy, capitulatory-type of low hit… the kind that really casts doubt on the market’s health. So far, we’ve only seen a blip; we’ve seen support around 1085 for the S&P 500. That’s not enough to really give us the needed readjustment to lofty expectations.  Like I said before, a move towards something around 1030 would make a little more sense in the long run.

S&P 500 Vs. VIX

In the bigger picture, don’t forget the point of all this micro-analysis is to better pinpoint the bottom. It’s only apt to be a few percentage point worth of difference, but o we can do that a couple of times per year, it adds up quickly.

Visit the prior write-up to better understand what the bigger-picture plan is. I may have an update later Tuesday or early on Wednesday.