I received a few e-mails today asking if today is an "orderly pullback" or the end of the "bear market rally" that I've mentioned. Well, it could be both. There is still room to move higher and still remain in bear market mode. However, in the short term, all today's move shows up as is a low volume pullback from the recent move higher.
If I were to play the indexes, I would not enter long right here. The markets are way oversold need more of a pullback to provide a good reward-to-risk setup. Take a look at the stochastics on the SPY chart. That's not where I like to enter.
I am focusing more on specific stock setups than playing the market. Since we are in earnings season, I will be playing the earnings-pullback setup for longs. See my recent CAT entry for a good example.
On the short side, I am looking for broken stocks that have bounced with the market, but remain weak. Be careful to identify stocks that are still short candidates versus stocks that have reversed and are now longs.