Market May Be Stabilizing In Front Of Earnings

The market remains very vulnerable at this point, though there seems to be some sort of a short squeeze brewing. Given deteriorated technical conditions, it's doubtful that a squeeze can take the market far.

Friday's high continues to be an important area for near term traders to watch. If prices move back above that area short positions put on at the falling 50-day average could be jeopardized. This does not mean, however, that it's a good idea to start looking for long positions. Rather, it means that trading opportunities are likely to be hard to find while the market looks to upcoming earnings for its next catalyst.

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The market may be seeking to stabilize near current levels in front of this upcoming round of earnings. As such new shorts or long positions are likely to see muted performance. If you are short, keep your stops over Friday's high and don't add any new positions. On the long side, steel and oil exploration might provide opportunities but in this very technically damaged market, it is prudent to keep most of your cash sidelined waiting for better conditions.