Editor's Note:

Stocks experienced some widespread profit taking on Tuesday. Is it the start of something bigger? Or just a one-day reaction to rising oil prices? That's what investors want to know. The 1300-1295 area on the S&P 500 index will be key. If the S&P 500 breaks down under this level it could spark a serious correction lower. If not, then traders will probably be encouraged to buy the dip again. This could be a pivotal point in the market's advance.

We already have a very big play list and we are leaning heavily on the bullish side given the market's trend. A breakdown would likely see several of our current positions get stopped out. Nimble traders looking for bearish plays might want to focus on small caps, which are likely to underperform their large-cap rivals. Plus, consumer-related stocks might underperform if oil continues to climb.

I am not adding any new plays tonight. Let's wait and see if the major averages bounce from support or breakdown. I've attached a chart of the S&P 500 below.

- James