Here's why we have a bounce, but with no enthusiasm

Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE).

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The U.S. market is up, Europe is mixed, which can only be described as disappointing. U.S. futures and European markets were up going into the December jobs report and rallied briefly as that number came in well above expectations, but traders quickly sold into the rally.

Still, given what happened this week the market response is disheartening for bulls. China, the proximate cause of much of this week's decline, has walked back all three issues that caused the turmoil:

1) Set the yuan midpoint higher overnight

2) Removed the stock circuit breakers

3) Essentially kept the ban on insider trading in place.

Here in the U.S., market internals are all consistent with at least a short-term bounce:

1) Stocks are in extreme oversold conditions

2) Sentiment is extremely bearish

3) In volatility, the CBOE Volatility Index is inverted, with the front-month contract higher than futures contracts several months out, an unusual condition implying traders are expecting volatile conditions for the short-term, and which often implies at least a short-term market top.

The immediate take-away is that the markets have shifted to concerns that the Fed will hike in March, when the next press conference is scheduled, and may in fact hike four times next year, rather than the two or three the markets are pricing in.

But the concerns are a bit broader than that. Traditionally, the Fed tightens when profit margins are accelerating and the economy is strong. This time, the Fed is tightening during a period of concern that profit margins may be contracting, and the economy is only mediocre.

Then there is oil, which is again moving down late in the morning, taking energy stocks with it.

Bottom line: Traders are not convinced the volatility is over.