NEW YORK ( TheStreet) -- It's amazing how much in the market can change in a week.

Seven days ago, the market was selling off in an orderly fashion through August lows in the S&P 500 of 1101. It certainly didn't feel like we were near a bottom at the time, but in a headline-driven bear market environment like this one, all it takes is one strong statement from an official or bold policy action to completely flip the script. You always have to be on your toes when shorting; it is not a long-term investment strategy.

Last Tuesday, on Oct. 4, we saw a classic technical reversal day, as smart money was apparently convinced the necessary action had been taken to support the troubled European banking system. Volume and price action, in the form of a bullish outside reversal candlestick, supported the notion that we had put in a short-term bottom. Commitment to the bounce over the next two days provided further evidence that we were likely headed for a positive fourth quarter.



While I was in the short camp as we approached August 1101 lows, I did not believe world leaders would allow the market to make the complete downside measured move before stepping in. I formulated a plan to cover my short position as we approached the 1070 area in the S&P, and did indeed cover the majority of my short in that area.

Tuesday's bullish engulfing candlestick convinced me to cover the rest of my short position. You should have a plan in place for macro trades, but when the complexion changes, you must always let the price action dictate your trading activity. Tuesday might have been the most important Technical Day of the fourth quarter, and was certainly a "day to take notice".

After Tuesday's reversal, I did not immediately flip long because I didn't yet trust this market, but I did start to look for cash flow trading opportunities intraday. We started to identify natural spots for the S&P to bounce to ahead of the important jobs number, and the logical spot was the 21-day moving average at $116.50. That calculated bounce occurred as scripted, followed by a gap up and pull-back on Friday.

On its own, Friday could have been viewed as a sign of weakness from the market, but such pull-back/rest was healthy for a market that had come so far so fast since Tuesday. Small pullbacks are healthy for bull markets because they allow investors a way in without feeling like they are chasing excitement.

I expect the market to reach 1250-1300 at some point before the end of the year. There are a lot of stubborn shorts still with their feet dug into this market. They are saying to themselves, "how can this happen," instead of watching the price action. This type of approach could put them out of business in the coming months if they don't have a pre-determined plan.

On Monday, the S&P 500 looked set to close well off the highs of the day, but surged in the final 20 minutes to put the finishing touches on another impressive, constructive day. The S&P 500 is now closing above its 50-day moving average for the first time since late July, a very bullish sign. The next big level to watch the upside will be 1210. A close above that level would put an end to the series of lower highs we have seen in this market since early August.

Stubborn bears might be asking, how is this bounce any different than the low-volume, holiday-type bounces we have seen over this course of this wide lower range? The most important answer is Oct. 4. That day was the strongest, most credible reversal bar we have seen in the last two months.

It also appears that European leaders are now taking this crisis more seriously, and are close to finalizing a bank recapitalization plan to instill the confidence needed to climb out of the latest mess. Another factor to consider is that we are entering earnings season. While the employment and housing pictures remain ugly, American corporations have generally surpassed Wall St expectations each quarter for the last two-plus years and provided a major boost to the stock market. This earnings season could serve as the knockout blow to the legion of short-sellers desperate to see this market fail.

I guess, ultimately, this bounce just FEELS different, based on the price action. The late "fake-lower-and-rip" into the close Monday is reminiscent of the old bull market. Expect the market to break out of this range to the upside within the next two weeks.

From a short-term tactical perspective, we've seen a 124-point move since Tuesday's bottom, so are a bit oversold in this area. I think at this point, you can start looking to build a core group of stock positions, while trading the SPDR S&P 500 ( SPY) around them as an overnight hedge.

I am looking to hold swing longs -- right now they are Apple ( AAPL), SanDisk ( SNDK), Exxon Mobil ( XOM), and JPMorgan Chase ( JPM) -- while controlling overnight risk with strategic SPY shorts at various oversold junctures.

I want to be able to stomach some small gyrations to capture what I think will be a bigger move over the next few weeks. With the amount of short interest in this market, bounces can come hard and fast.

*Disclosures: Scott Redler is long AAPL, SNDK, XOM. Short SPY.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.