There is no doubt with earnings season over there will be very little in the way of news flow for the bulls to hang their hats on for quite some time. With seemingly negative news out of Europe every day and instability in the Middle East and the Korean Peninsula there are opportunities for sellers to hammer the market on a daily basis. Often, when you see this level of comfort on one side of the market you begin to see vicious moves in the other direction. That is what we saw in the final 90 minutes today.

After Friday’s reaction to the job’s report we put on our short caps. We were rewarded for about 2.5 days by fading the market at key resistance levels. Today’s final hour was the only time fading market strength was punished instead of rewarded.

Does this mean today’s low will mark the short term low in the market? Not necessarily. Over the next few days the market will give us data and we will trade accordingly. A few things to consider

1. After the market double bottomed this morning buyers were prepared to step in after 2:30pm when we failed to make a new low. Watch this pattern the next few days. Will buyers step in aggressively after some weakness creating a series of higher lows? This is what we saw in the week following the February lows.

2. We will pay close attention to how the market reacts to any type of significant news in the next couple of days. If buyers step in with news flow going forward then that would be a shift in psychology.

3. Pay attention to the momo stocks like CREE, BIDU, SNDK, NFLX, and VMW. If they trade above last Friday’s highs we are most likely going back to 112 on the SPYs. Then it should get interesting.

I will continue to fade on the short side as we touch key longer term resistance levels, but will be quick to cover if we hold above successively higher levels. I will also begin to fade the market on the long side if we fail to take out early lows each day. Something that I was hesitant to do prior to seeing today’s closing drive.