How to Play a Decline in the S&P 500

NEW YORK (TheStreet) -- Could this be the last gasp of the rally? Time will tell. In my previous commentary I talked about looking to short S&P 500 futures on another test of 1100. Well, the market has arrived at that critical test.

A clean breach above 1100 will lay the groundwork for further gains, while a breakdown here will trigger selling and profit-taking.

The market did clear a major hurdle when it did not implode following last Friday's dismal jobs report. However, challenges remain. The market is up the better part of the last seven sessions. Every indicator one could possibly use on a short-term basis is screaming that the market is overbought. And while the Dow Jones Industrial Average is reaching new highs, the move is not being confirmed by other markets. Take the Russell 2000, for example. It is not even in the vicinity of its high put in back in September.

Adding uncertainty to the rally is the fact that the market has continued up on anemic volume. The buying is drying up, pure and simple. It appears that the bears are getting ready to wrest market control from the bulls.

One only has to look at the FOMC's comments following last week's meeting and some comments made this week by various Federal Reserve officials to conclude that the economy remains quite fragile. The FOMC did not drop its language about holding rates at exceptionally low levels for an extended period. Although the market loves lower rates, the continued inclusion of this language shows that central bankers remain very concerned about the economy.