Oil dragged stocks lower, as the West Texas Intermediate crude futures contract for February fell to $26.55 per barrel, the lowest since May 2003. Analysts say the expiration of the contract Wednesday added to its volatility. In late trading, the March WTI contract edged lower after the American Petroleum Institute reported a build of both oil and refined products. U.S. government weekly inventory data for both oil and refined products is expected at 11:00 a.m. ET Thursday.
Bulls were encouraged Wednesday, if only in that the stock market opened sharply lower and recovered ground instead of opening higher and trading down, as it has so far this year.
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Hogan said the turnaround began when sellers became exhausted, and after the S&P 500 fell below its 2014 low of 1,820. "A lot of it started at 1:20 p.m., the pivot point for the S&P was 1,820 and then it caught fire," he said.
Thursday's markets will be watching weekly jobless claims and the Philadelphia Fed survey, both at 8:30 a.m. ET. There are also earnings from Travelers, Union Pacific, Verizon, Bank of New York Mellon, Alaska Air, Southwest Air, United Continental and Canadian Pacific, all before the opening bell. American Express, Starbucks, Intuitive Surgical and Schlumberger report after the close.
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Ari Wald, technical strategist at Oppenheimer Asset Management, said the market could be setting up for a near-term relief rally, but any rally would be short-lived.
"I think it's going to require some time. A relief rally followed by what could be an undercut of today's low," said Wald. He said the level where the market turned was important. "It did occur at the 2014 low at 1,820. That's where we saw some buyers come in and buy some shares. I still think we get to 1,740."
"We can make the case of a low, but not necessarily the low, and it's too soon to give the all clear," Wald said. "Think of the injured athlete that breaks his ankle. He can't get back on the field. He needs time to recover. That's what the market needs here."
Lindsey Group analyst Peter Boockvar has said he expects a full 20 percent — bear market correction in the S&P 500. He did say there were signs of capitulation Wednesday.
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"In the morning, down volume was almost 97 percent of total volume. That is a panic sign," said Boockvar. "The Russell traded positively. The Nasdaq was barely negative. Today was a victory for the bulls. Maybe this means we have a short-term bounce off oversold conditions and then we'll see what happens."
Markets are also watching the European Central Bank, which has a rate meeting Thursday. While it is not expected to take action, traders are watching for comments on the global economy, financial markets and any further discussion of easing.
"If today's an indicator, we'll settle out and work through the oversold conditions. We'll get through the rest of earnings and then see what happens," said Boocvkar. "This is literally a day-by-day market."
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