Tradeable Opportunity in S&P

The S&P 500 is looking tired. It appears that the "correction" of last week is over, at least for the time being. There are many areas of concern, however, and caution must be exercised.

From a technical standpoint, the path of least resistance does still, in fact, remain higher. This is in jeopardy, however.

Last week we saw heavy selling on increased volume -- never a good sign. The S&P 500 also broke under its 50-day moving average around the 1053 area, and we have seen multiple 10-to-1 down days -- also symptomatic of a market that is extremely fatigued. The volatility index, or VIX, spiked to over 30. That level has not been seen since July.

On a positive note, the selling pressure seemed to exhaust itself, with the big up-thrust in the VIX. Fear levels got to an extreme, and that usually marks at least a temporary market bottom. That is precisely why we have seen a bounce higher in the last few sessions.

In addition, the S&P held major support at the October lows of 1020 and the range top at 1040. So far so good, but I cannot help but remain skeptical. It felt last week like we may have been very close to a complete market meltdown. Many would argue that the only thing that prevented another crash was the plunge-protection team.

There are a few other factors adding to my sense of angst when it comes to this market. The market has begun selling off on good news. It seems that sentiment has once again shifted, and we are seeing continued anxiety over the strength of the potential recovery.