Reversal Coming?

Today all major idexes formed a very strong looking hammer reversal bar on increased volume, suggesting that decline might be over, at least temporarily. After such a strong buying right below the yearly low there is a chance we might see a rally. However, SMI momentum indicator is still convincingly negative, meaning that today's low should at least get tested. Buying into reversals seen today with no upside confirmation is bottom fishing, which is not exactly my style of trading. I would like to see some real upside strength before I get aggressive on the long side.

As for stocks, I'm currently holding my SLV long and CTSH short. I'm keeping a very tight stop on SLV, considering how volatile silver market can be. It looks like CTSH short was a bad call. I'm keeping my stop above 75, but it looks it should be taken out pretty soon. Anyway, I opened this short position just in case market plunges from here. Better shorting opportunities should appear after a rally back to the MA200.

Right now I'm not too interested in the short side as we should see some sort of a bounce. On the other hand, many leading stocks have held high level bases throughout this correction. As soon as the downside market pressure lightens up, these stocks should be the first to break out. If market rallies from here I might consider opening a long position or two just to have something in case today's lows don't get tested. However, I don't intend to invest more than 40% of my account in the long side before market confirms some strength. The best looking stocks in my opinion are CFX, CPHD, GLNG, GMCR, QCOR and RADS. If any of these exhibits some upside momentum, I'll take a little bit of risk and be an early buyer.