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This Pullback May Not Be Over Yet

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Another late day rally, on heavy volume again. Man, this is a brutal market. You cannot hedge yourself. Late in the day, they stripped out the shorts.

What's that mean? It means you get a quick rally out of nowhere, and all the shorts are forced to cover.

What happened? Well, the CBOE Volatility Index (VIX), which had gone from 12 to 16 in two days, collapsed about 2:30 PM ET. That seems to have triggered buy programs in the eMini S&P 500, as well as ETFs. You also had Einhorn talking about Apple.

Here's what I see.

Pullbacks have been shallow. The decline from Friday's 5-year high to today's low was a measly 1.3 percent on the S&P 500. We are up 7 of the last 8 weeks. This is a pullback?

In fact, pullbacks have been shallow for over a year. The two biggest pullbacks last year were both less than 10 percent: the May pullback (9 percent) and the October-November pullback (about 7 percent).

The last time we had a pullback of more than 10 percent was August 2011, when over the course of three days (August 4, 5, and 8) the S&P pulled back 11 percent.

But that doesn't mean we can't get a bigger pullback this time. It's not over yet:

1) European economic numbers have been weak;

2) U.S. not much better with weak regional manufacturing (Philly Fed)

3) China trying to rein in inflation and real estate speculators;

4) sequestration issues in the U.S.

Still, we know all this. The bottom line: investors haven't been hurt enough yet for the market to be in trouble. But it is not over yet.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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