China Bottoming and Day 13 of Selloff

China came out with some fiscal stimulus in the form of tax cuts to support the economy, and from reports, I am hearing that they are trying to push loans out as fast as possible to reverse the slowdown.  I don't think it works in the long run, but it does help sentiment in the short run.  Also, Shanghai Composite has gone up 8% over the past 2 trading sessions, so it does look like it has found a short term bottom.  I don't think it will go up much from here, as its already rallied a lot, but if it can just stabilize, that will take away one brick from the wall of worry for this market. 

Also, Italian 10 year bond (BTP) yields have stabilized after surging higher last week on Italian budget worries.  With the ECB unlikely to raise rates for another year, and the huge amount of carry in the Italian BTPs, once the budget concerns die down, there is a lot of room for BTPs to rally.  It is not going to be easy to kick Italy out of the EU, and even if they did leave, the Italian central bank would set their yields close to the ECB rate, just because of the state of their economy. 

Friday was a tricky session, the fakeout rally in the morning sucked in eager bulls and then chewed them and spit them out into the afternoon and close.  It was a classic Friday risk off session, as the sentiment gets worse.  From a purely time perspective, this selloff has run its course, and most selloffs in bull markets end by day 13, and I am still considering this a bull market based on the rising 200 day moving average.  With the gap up this morning, it probably will get tested by sellers after the US cash market opens, but I expect buyers to show up around the SPX 2760-2770 area, like it has on Thursday and Friday. 

This is the heaviest earnings announcement week, so once this week is behind us, there will be a deluge of potential stock buybacks coming.  Odds favor the bulls here, so I got long on Friday, and will look to add on any intraday weakness today, to hold for several days.