Dr. Kris'  Instablog

3:55 pm ET: There's a bit of a bifurcation in today's market action. All of the major averages are down for the day except for the Dow Transports (DTX) which looks determined to hang onto its early morning gains. Since the DTX is considered by most technicians to be a leading indicator of market direction, this is good news for all of you bulls. However, it's not quite time to don your party hat just yet because market internals are painting a different picture.

The Trin (Arms Index) and the VIX (volatility index) are both increasing, and rapidly, too. The positive VWAPs are losing ground while negative VWAPs are increasing. (The VWAPs are a rough measure of institutional buying and selling--strong +VWAPs indicate buying while strong -VWAPs indicate selling.) All of the internals are on the same page, and that page is bearish.

Now that you understand the bifurcation the question is: which way will the market move? My opinion is that it likely will be depend on two things: 1. What Germany decides to do regarding more Eurozone bailout measures (that will happen on Wednesday) and; 2. If the Fed is accommodative to further quantitative easing (that will come on Thursday). Since both of these events have the potential to move the market significantly, we can see why the Street is getting a bit nervous (and hence the rise in the VIX).

In regards to these two events, I wouldn't recommend taking any major long or short positions. Seasoned options traders could try a long straddle or strangle on the SPY or the Q's to take advantage of this uncertainty but I would only make this trade with mad money.