In my prior post I warned the bulls about getting too excited as weak volume coming in contact with a cycle change point was a recipe for disappointment.  Today we saw what that combination can bring.  While today's selloff was nasty, volume did not increase, which means that near term market direction is still up for grabs here. 

There is no reason to press the long side right now, but, on the other hand,  the burden of proof is squarely on the bears to show us if they are serious about taking this market lower or not.  Yes the overall trend is still firmly down, in spite of what Bob Pisani and other CNBC cheerleaders would try to tell you.   One of the major factors working against the bulls is the fact that there is no clear cut group that is stepping up to lead.  Energy has been outperforming of late due to the recent rally in crude oil, while the beaten down financials have benefited from short covering and bargain hunting. 

WIth that said, however, if selling pressure dissipates, we could see a resumption of the upward push as the grossly oversold conditions in November continue to be worked off.  The weekly Dow wave structure heading into the November low was a clear five wave decline which means that this counter trend rally may have farther to go in terms of both price and time.   Let's see how it unfolds here as the market continues to be choppy over the near term with no clear cut ease of movement evident in either direction.

If I sound like I am playing both sides here, it is only because the picture is murky right now and I am waiting for the market to show its hand as to which way it wants to go. 

Below is a daily chart of the S&P 500 with the NYSE volume oscillator and the NYSE advance decline line.  Notice that the volume oscillator in the middle pane did not confirm the latest high in the push up from the November lows.  Also note in the bottom pane how the NYSE Advance/Decline line ran smack into resistance before today's selloff.  The next few days should be very interesting.