Where Do We Go From Here?

The majority playbook is still on the bearish side. This camp believes we have a little more room to run, that we are entering the end of the quarter with a lot of professional traders that have very light exposure to the market, that the trend is to the upside into the end of the month.

Once we get out of the quarter and get into earnings season, another downturn will occur.

So the game in April will be to watch the reaction to earnings guidance.

In general, no one is expecting a change in the tone—companies will be extremely conservative and generally downbeat.

So watching how stocks react to the downbeat guidance--whether they trade up or down--will give a very good indicator of whether there is any sustainable bottom in place.

Bulls believe that the market will seize on any piece of positive commentary, and that the selloffs on lower earnings guidance will not be as severe as bears believe because the market has already priced in bad first half and lower second half earnings.

Bears believe that the global stimulus programs will be ineffective, and that global wealth destruction has been too great to turn the markets around so soon.

For the moment, however, we have a crowded trade: professionals are trying to buy shares going into the end of the quarter, but sellers have no reason to part with their shares--for the moment.

Elsewhere, a modified uptick rule is coming back, but don't expect any rule to be in place for many months.

I noted last night that there are reports that the SEC will propose bringing back a modified version of the uptick rule during its meeting on April 8.

This morning three exchanges released a joint letter supporting the concept of a modified uptick rule, which would call for:

1) Short selling can be initiated only at a price above the highest prevailing national bid;

2) In combination with this updated tick test, a "circuit breaker" that would trigger the application of the tick test only after the price of a stock has experienced a precipitous decline by a certain percentage, perhaps 10 percent.

Unmentioned in the release is the fact that, with the exception of the NYSE, the technology is not in place to do this. There is no "switch" to flip.

We are talking about MANY MONTHS before this could happen.

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