Ms. Yellen knew she made a terrible mistake last week by not raising rates. She made a speech to the world last night and did her best to correct that error in judgment. She said she would be raising rates this year. The banks would be the biggest beneficiary in that scenario, and it was a way to bring the averages up. It worked early on today as those futures exploded higher and held for the most part allowing a large gap up that started to run. And then it stopped running and went into reverse. A massive quick move down had the Nasdaq down over 100 points from its intraday high at one point before bouncing some. It was very ugly for the market overall. The market is unable to find leadership in enough areas to hold things up. Biotech stocks are in a strong bear market, with one after another falling hard day after day.

Many of them are on a seven-day losing streak, which is rare for them, or anyone, for that matter. Most of them are very high P/E stocks. Many have no P/E at all. It hasn't mattered, but, of course, now that things have changed, they do matter. Some very intense selling is going on there, and for that matter, for several months quietly. There have been five distribution episodes off tops in the biotech arena over the past six months. That's quite a few, and tells the story about how these stocks have changed their character. Big money looking to unload on rallies off retail buying. With only the banks leading up early for the most part the market just couldn't hang on. It tried, but simply couldn't get the job done. Violent action, but in the end, another failure for a market losing its upside momentum more and more these days. A good day for the bears and a bad one for the bulls.

So what about fear, and a minus bull-bear spread? What about record short interest? All of these things will probably hold the market up from falling into an immediate bear market, but what's ruling things now is the declining global fundamentals. It is worse than anyone expected with Asia leading the way, but make no mistake about it, everyone is joining in on the deteriorating fun. When we get our ISM Manufacturing Report next Thursday the market bulls better pray for a number over 51 since the last reading was 51.1. Any number below is showing further signs of weakness, and if we get the dreaded sub 30 reading, look out below as we'll be in a recession. A recessionary number would likely lead to more global market weakness, thus the bulls better pray for a miracle.

On top of that, the Fed would, once again, have to say she can't raise rates because the risks are too high. That's not something the market will like on any level since it wants to see a show confidence. A very interesting time is upon us. While pessimism is at extremes, in order to get the move back up to the old highs, or close to them, we need a catalyst. That would be an improving economic report on manufacturing. We will bounce hard at some point anyway, but the degree of the bounce will depend on how bad things are here and abroad. Things certainly aren't boring for market participants. The hard part is understanding what's really controlling things, and for now it's still fear versus fundamentals. Fear is losing for now.

Shorting a market that has oversold conditions along with record short interest, and a minus bull-bear spread that will likely only get worse after this week's market action is not an easy thing to do. We can fall much further, but I still would mostly, if not completely, avoid shorting simply because there's a lot of fuel for a strong rally should the market get the right piece of economic news out of the blue. It can always happen. Do what feels right to you, of course, but understand the risk-reward from those perspectives. Nothing will be easy for either side here. Cash or mostly cash is still the best way to proceed.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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