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Are We Back to Sell on the Rallies?

What's next? Are we back to sell on the rallies?

Not necessarily, but it may be easier to move to the sidelines for a few days.

Remember the trade: stocks have held up well even as oil has moved up 30 percent in the past two weeks because traders were assuming that the rise in oil would be a short term phenomenon, and that the global growth story was intact.

Three developments have happened today that have made the outlook more cloudy:

1) as focus has moved to the Gulf Arab states (where the oil is), there is a realization that oil prices are not only unlikely to drop back to $80 any time soon, but that they may not even stabilize quickly.

There are plenty of traders trying to parse what — if anything — it means about police attacking protesters in a small town in eastern Saudi Arabia. Bulls dismiss this and note that the capital is calm. Bears note that the protests and the shootings are where the oil and oil terminals are--and that's what's important.

Also, a good part of Libyan production is now clearly offline, and it is unlikely to come back online and time soon. It is not clear how much excess capacity there is in the world. So far, OPEC does not seem to have a clear consensus on what to do.

2) two headlines have again challenged the "onward and upward" global growth story: a) the China trade deficithas indicated that global demand is not as robust as some may have thought (you cannot blame this large a deficit on just the Chinese New Year), and b) Moody's downgrade of Spain's credit rating (with warnings of further downgrades), saying that the cost of cleaning up the banking sector will be more than expected.

Spain's GDP, at $1.38 trillion, is TWICE the GDP of Ireland, Greece, and Portugal COMBINED.

These headlines do not destroy the global growth story, but they do put a break on it.

Finally, try to understand this from a trader's point of view, one that is running a long/short equity book. It is almost impossible to run that kind of book in this environment. No one cares about your longs and shorts. It's all about macro. While it is frustrating, there also opportunities to pick up growth stories that have temporarily sold off.

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