The chart above is the daily SPY chart. Notice that the most recent decline has been surprisingly choppy and overlapping. Looking at the financial news, one would expect to see a straight down decline similar to what happened in January. Since this has not happened, it seems that there is enough buying at these levels to sustain decent prices. Carl Futia had a nice post discussing the fact that even with 9 months of bad news, we are still only 5% below the January lows. Once the bad news ends, he continues, the phantom demand holding up the market should propel the market higher. Notice today's record volume, and compare this volume spike to previous volume spikes; they all occured a short-term bottoms.
This bottom may be more significant because it could be the final decline in WaveC from SPX 1576. Also, given the overlapping structure of the decline from 1313, it looks like this may be an ending diagonal, which, when broken, could lead to a violent countertrend move. MACD divergence is forming, but not yet confirmed. Also, price has bounced off the 50% fib level of 768-->1576 with vigor.
The recent Tickersense blogger poll is at a record bearish level and everyone I talk to is super bearish. I would imagine that at this point, the worst case scenario for the stock market has been nearly priced in.
For the reasons above, I closed my short position around SPX 1200. However, I will go long only if price breaks above the upper trendline of the ending diagonal, or if we get a bullish follow-through day (+1.7% on higher volume) within 4-10 days.
Some stocks on my buy list include FXI, IFN, GS, BAC, MVL, AAPL, and DXPE.