Welcome to Turnaround Tuesday. A different sort of thrill-ride seems to be ahead for this market, after yesterday’s brief 1,000-point drop for the Dow industrials and a move into correction territory for the S&P 500 and Nasdaq Composite.

There’s currently enough green out to help erase Monday’s nightmare and knock stocks out of this five-session losing streak. And just when everyone thought Beijing didn’t care, China’s central bank cut benchmark lending and deposit rates by 0.25 percentage point. Perhaps they were bothered by another 7.6% drop for the Shanghai Composite.

Wariness doesn’t look like leaving this market any time soon, though.

Among those who can’t shake the unease is blogger The Fly. “This feels different,” he writes. While previous market dramas were triggered by fixable, short-term things like Greece, and even Ebola, he fears China is a permanent problem that won’t go away. “If the China story is truly dead, I’m afraid today’s ‘drop’ will look like child’s play one year from today,” he says. More on that here.

Our chart of the day is lining up with that gloom, with its history lesson showing how a 20% selloff may be just around the corner.

On the more optimistic side is Brenda Kelly, analyst at London Capital Group. She says unlike in 2008, yesterday saw gold and even bond markets trading stay fairly static “and we did not exactly see a great rotation from risk assets into safe havens.”

If you’re looking for more of that feel-good stuff, then the great vampire squid, otherwise known as Goldman Sachs, is here to serve. The investment bank sees a sizable bounce coming for the S&P 500 SPX, -1.15% , and doesn’t think China, commodity prices and emerging markets are going to doom this market. Read more in our call of the day.

Keep your eyes open in these uncharted waters. You never know what you’ll find.

Key market gauges

A hefty rebound is in store for Wall Street if this action keeps up. Stock futures are pointing to gains of nearly 4% across all major indexes. Dow US:YMU5 futures are up 539 points. That’s as Asia ADOW, -0.45% kept up the volatility, with sharp losses for the Shanghai Composite SHCOMP, -1.28% and the Nikkei NIK, +0.17% . But crude CLV25, regaining $39 a barrel is likely doing something for confidence here. Europe SXXP, +0.75% is also rebounding after its worst day since 2008.

The dollar USDJPY, -0.05% is up, especially against the yen. Gold US:GCV5 is dropping.

The economy

Case-Shiller’s 20-city home price index shows a 1% rise in June. Then at 10 a.m. Eastern, it’s new home sales and consumer confidence.

Remember that later this week we get the Jackson Hole, Wyoming Fed extravaganza, with Federal Reserve vice chairman Stanley Fischer on tap to talk about “U.S. inflation developments.” And that may offer a big clue about rate hikes.

The quote

“With my G-7 and many G-20 counterparts there were frank, honest conversations, you were on the phone pretty frequently, often weekly. With China, you don’t know who to call. It’s hard to know where decision making occurs or who’s calling the shots.” — former Treasury official talks about how tough it is to deal with China.

The call

As stock futures go barreling ahead, Goldman Sachs has pushed out a bullish note for Wall Street this morning. David Kostin and his team say parallels with 1998 suggest a rebound is in store for this market, after yesterday’s correction left the S&P 500 down 11% from its May record high.

“We expect the U.S. economy will avoid contagion and continue to expand. [The] S&P 500 will rise by 11% to reach 2,100 at year-end. Such a rebound would echo the trading pattern exhibited in 1998, when U.S. equities rallied and largely ignored the Asian financial crisis,” says Kostin. History shows that stock markets tend to recover within three to four months following the end of a correction, he notes.

Assuming the current one ends shortly, we should be right at all-time highs by December, says Kostin.

And next week’s data — ISM manufacturing and payrolls — could “provide reasons for investors to have confidence in durable U.S. growth.” If those readings come in solid, it would be proof the U.S. expansion is going ahead despite any China slowdown, he says.

Kostin’s advice is to own stocks that have high domestic sales and avoid those with high foreign sales; be overweight financials and information technology, underweight energy, materials, utilities and consumer staples.

Goldman also pushed out another note last night, aimed at allaying clients’ fears over China’s economy and currency, and over lower commodity prices. In short, none of these are going to trigger a global recession. The note is interspersed with plenty of Goldman pats on the back for itself.

The economy

The dollar USDJPY, -0.05% is up, especially against the yen. Gold US:GCV5 is dropping.

Earnings

Toll Brothers TOL, +5.09% reported its profit fell 32% in its third quarter, but orders are up, and its shares are rising premarket. Best Buy BBY, +0.36% shares are surging after profit and sales top estimates.

More in Movers & Shakers

The buzz

The tech sector is rebounding. Helping lead the way, Apple AAPL, +3.03% is getting a big boost in premarket after analysts said China concerns are overblown. Analyst Brian White at Cantor Fitzgerald said the selloff has taken Apple’s stock to “severely depressed valuation levels.”

Mozilla’s CEO Chris Beard is threatening to fire an employee who has been ranting about “social justice bullies” on Reddit.

The chart

The S&P 500 had gone about 36 months without a correction of at least 10% before yesterday put an end to that. But three other streaks longer than this current one ended with eventual drops of 22%, 34% and 57%, according to Gail Dudack, chief investment strategist at Dudack Research. The median selloff was 28%.

So judging by that history, it may not be time to dismiss a 20% bear-market selloff yet.

FactSet

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