As I mentioned in yesterday's market direction call any negative news will pull the market down. The housing news alone is enough to bother the market but the rise in the US Dollar also hurt equities today, let alone unemployment news and Manufacturing numbers.

The economic news today was enough to pull the market back. The see sawing back and forth is bringing volatility higher which is a great thing for those of us who do options, but it can be a little unnerving for those who are buy and hold stock investors or dividend investors watching their stocks thrash about.

Yesterday the US dollar moved lower and equities moved higher. Today exactly the reverse has happened and equities have sold off. Today the news of only 38,000 workers being hired for the month of May (which still has to be verified by the way) worried the market. Honestly though let's stop for just a moment and think about it. Apple is selling their ipads like crazy yet they are made in China. Iphone - China. Most auto parts - China. The US really needs a bit of a wakeup call.

Then auto sells from Ford and GM came out weaker than expected, well no kidding. How many people need to keep buying new cars every year? People need to be working to spend and right now many who are working are trying to pay down debt.

Then the drop of the US Manufacturing sector to 53.5% which is the biggest drop in month month since 1984, shows just how precarious the economy is. How many economists said the Japanese Earthquake-Tsunami wouldn't have any impact? Most. Wrong again. We are just now seeing that impact.

Now all we need is for Greece to announce, "OK, we are going to restructure our debt" - meaning default time. Now that will really bring the stock market down.

The economic problems are not going to go away for years if not decades. Those who want a market that just keeps climbing are living in a dream. There are going to be tough days ahead both up and down. This is why I believe in options over buy and hold or even dividend investing.

Remember, many stocks in this market are over valued by every stretch. As I said in my article on the cautious bull, the easy profits in this bull market have been made. Keep some cash around. The market also is watching the ending of QE2 to see what effect that may have or whether QE3 is announced. Stay tuned for that.

Don't forget that the Federal Reserve through its very actions is kicking the problems down the road. The hope is to buy some time for the economy to recover and for bankers and politicians to get their act together. But with 2012 an election year in the US, the chance of any real change is limited at best.

The chart below shows today's action up to 1:30 PM. Yesterday a nice rally, lower US dollar, today a nice selloff, higher US dollar. Noise is driving the market. Remember that fear and fear alone drives equities. Fear of missing a rally and fear of being caught in a downturn. This is the same fear that as an option seller I am trading against. This bull market is not over yet but nothing goes up in a straight line. It never is a comfortable ride after the easy money is made in a stock market recovery. Below is the chart for today June 1. The story from yesterday was that I should have listened to MACD that indicated at -0.93 that yesterday's rally was suspect and not confirmed. Meanwhile even with the selling today, the Ultimate Oscillator at 1:30 PM is still neutral with a slight bearish bias whereas yesterday is was neutral with what I took to be a slight bullish bias, which in hindsight was not the case as it was not above 50.0.

Keep some cash ready and remember that this market is over valued and so are many of the stocks in it, particularly defensive stocks. I sell put options so I can pick strike prices that I think stocks are fairly valued at. I am not seeing any market crash at this stage, but I remain picking naked puts to sell at prices where I will hold stocks. Tread carefully - this market remains overvalued.