The bounce in stocks continues. The S&P 500 is back above the 1,000 level and the Dow Industrials are back above the 9,300 mark as investors ignore bad news and only focus on positive news. The economic data today was mixed. The big report was the Philly Fed economic report, which was better than expected. Leading Economic indicators were a little disappointing and weekly unemployment numbers were worse than expected. The U.S. dollar is still sliding. Weakness in the dollar is normally bullish for commodities but today the commodity space is inching lower with gold, copper, grains and oil all in the red.

Yesterday it was the plunge in China that made headlines and spooked investors. Today China led the bounce. The Chinese Shanghai market had fallen about 20% in two weeks with yesterday's 4.3% drop. Today the exchange turned in a sharp +4.5% oversold bounce. The Hong Kong Hang Seng followed with a 1.88% rally. The Japanese NIKKEI gained 1.7%.

European markets turned in a positive session thanks to the rebound in Asia. The English FTSE rose 1.4%. The French CAC-40 climbed 1.59%. The German DAX rallied 1.5%. There was some news late in the day that authorities were raiding Porsche headquarters in Stuttgart under allegations of potential stock manipulation in shares of Volkswagen. Porsche had tried to buy Volkswagen back in May but the deal collapsed. The two car companies are still trying to merge but investigators suspect foul play with Volkswagen stock falling 36% in the last six days.

The market-moving report today is the Philadelphia Federal Reserve Bank report on manufacturing and economic activity. Economists were expecting the Philly Fed index to rise from -7.5 to -2.0. The August results came in at +4.2, with positive numbers indicating expansion. This was a big surprise with the first signs of growth in 10 months. Bulls grabbed on to the news and ran with it.

Elsewhere the private-sector Conference Board said their monthly index of Leading Economic Indicators (LEI) had risen 0.6% in July. Economists were expecting a rise of 0.7%. This is the fourth gain in a row but the gains are slipping. The LEI was +1.2% in May, +0.8% in June and now +0.6% in July. The LEI is supposed to forecast economic activity in the next six months. The consumer expectations component of the index was the biggest drag, which makes sense given high unemployment. Speaking of unemployment the Labor Department said their weekly initial jobless claims rose more than expected. Economists were forecasting a drop to 550,000 new claims. The Labor Department revised last week's claims from 558,000 to 561,000. This week's number jumped to 576,000. Continuing claims remains almost unchanged at 6.24 million workers.

The record high unemployment continues to plague the housing market. The Mortgage Bankers Association said foreclosures and delinquencies hit new all-time highs in the second quarter. What's really scary is the problem has spread from sub-prime mortgages to prime fixed-rate mortgages. The MBA said that 4% of all mortgages are in foreclosure and just over 9% of homeowners with a mortgage had missed one payment or more. There's a new wave of foreclosures coming and it's going to keep a lid on the housing market. If people aren't paying their mortgage payment they're probably not spending much elsewhere, which was evident in Sear's earnings report today.

Sears Holding Corp. (SHLD), the owner of Sears and K-mart stores, reported earnings this morning that were way below analysts' estimates. Wall Street was looking for a profit of 35 cents a share. SHLD delivered a loss of 17 cents. Revenues plunged more than 10% from a year ago and same-store sales at Sears fell 13% while at K-mart they fell 3.9%. The stock gapped open lower and is currently down 11.6% at $65.16.

In other news shares of AIG are up 18% to $31.44 as investors react to comments from CEO Robert Benmosche. In a recent interview Benmosche said, "at the end of the day, we believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well." This has sparked another round of short-covering for anyone who could actually find stock to short.

Currently the market is showing a pretty widespread rally. The only sector index even close to negative territory is the RLX retail index. The banking sector is showing the most strength followed by gambling, biotech, insurance, railroads, and healthcare.

The S&P 500 index is up 0.8% near 1,005. The NASDAQ composite is up 0.77% at 1,984. The Dow Industrials are up 0.5% at 9,329. The small cap Russell 2000 index is up 0.7% at 565.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

Scanning the OptionInvestor.com play list for movers I see that FLR is up another 2% at 54.32. Our first target to take profits on FLR is $54.80. The bounce in FSLR, a put play, has stalled at $135.00. Shares are trading back under $132.00 this afternoon. GENZ has broken higher and hit our stop loss at $52.55. ICE is breaking out over several layers of resistance and hit our stop loss.