In this my second report I am looking at the market direction of the S&P500 after 4 PM. If you didn't read my report on tread softly - the market is overvalued take a moment out to read it now.

I mentioned in my first report many of the reasons behind today's sell of, but a good overview was on www.marketwatch.com  entitled U.S. stocks slammed by downbeat data. It's a good overview and worth a read but basically everything and the Greek kitchen sink downgrade was thrown at the market.

I just want to go over the chart below which I took after the S&P500 closed. The drop of 2.28% has brought the S&P almost to the 100 day moving average. At 45.12 the ultimate oscillator is signaling that there is more weakness to come and the divergence on the MACD is at -1.85 again a clear confirmation that today's selling has more to come. From experience, normally a selloff such as today will not end overnight. There can be some up days but most of them will be suspect until we see a new higher high. My market direction call is to the bearish side. Tuesday's volume for the rally was decent at 2.8 billion shares, but we have seen better days and poorer ones in the past few months. The selling today of 3.2 billion shares is not nearly as high as previous sell offs which you can see in the chart.

Interestingly the VIX which measures the volatility in stocks only got up as high as 18.48 and closed at 18.30. On May 23 it reached a high of 20.03 before closing at 18.27. So be careful. As I said in my first report for today, many stocks remain over valued which gives them plenty of room to fall.

But the smart money has moved from commodities to defensive stocks and I noted today that Clorox closed at $69.34, which is a long way from $65.00 which I think is more than fair value for Clorox. McDonalds (MCD) closed at $80.98 which is way up in over valued territory and PepsiCo (PEP) closed down just .31 cents keeping the stock firmly in over valued territory. The smart money knows how to play this game. Keep these stocks looking strong and the retail investors will move into them, and then the smart money can leave and the retail investor can get hammered if these stock do not hold up.

Remember too that with a selloff like today, all the "talking heads" will parade out their perma bears with dire forecasts, but remember too that this market is as manipulated as it ever was. The Federal Reserve wants to see the economy grow, unemployment fall and people continue to spend. That may mean QE3. In my opinion this bull market is not anywhere near dead yet. I read an interesting article on the Kobe Japanese Earthquake and how it affected US unemployment for almost 12 months. This latest earthquake-tsunami is only just starting to be felt. Toyota and Honda earnings were terrible in the latest release, affected by the recent Japanese disaster. This latest disaster will take many months if not longer than a year for the world's economies to recover, let alone Japan.

Calling short term market directions is not easy because as you have just read, there are more factors than just technicals involved. Market sentiment often out weighs the technicals and right now the sentiment is summed up in a word - "worried".