Yesterday's late reversal and strong trading this morning is pointing toward a possible oversold rally, much like the one in early February. Its a little early to predict this, as we've see 100 point swings either way in the DJIA frequently. But the Financial stocks are oversold. Citigroup (C) really has taken a beating.
We could see a rally, but it will take some time before the market is ready to make any broad moves higher. We have to see more economic data come in (specifically jobs and interest rate data), and we need to see more from corporations. Can non-financial companies report strong earnings, or will they begin to take a hit as well? Will the credit and mortgage problems continue? Will they get worse? I'd say that the financials will continue to be a source of pain, while many other companies will hold up.