Editor's Note:

We are facing a schizophrenic market. Every other week we are rotating between extreme pessimism and euphoria, between massive drops and huge rebounds. I really do not want to sound like a broken record but bear-market rallies tend to be very fast and sharp. Even though the market is up about +10% from its Tuesday low the overall trend is still a bearish one of lower highs and lower lows.

I am not convinced we've hit the bottom for stocks. Yet the action in Europe with EU leaders, including Germany's Merkel and France's Sarkozy, on recapitalizing the banks is very positive for the market. So far it's all just talk until we actually see a plan come together. This week could be rocky if the EU does not approve the next loan for Greece. Everyone is expecting Greece to default so they might decide to stop throwing good money after bad. It does seem like the default time horizon for Greece has sped up significantly. Instead of a default in the next year many are wondering if it will be in the next month.

The extreme market volatility makes it very tough to trade. I would hesitate to chase stocks after a +10% bounce. I would also hesitate to launch new bullish positions with the market paused near downtrend resistance. Thus we are not adding any new long-term trades tonight.