This post contains a comprehensive assessment of the stock market, based on many of the indicators I follow. The conclusion is that it is weak and a correction is due; however, some more strength can be expected in the next trading sessions. Let's take a look:

SPECIAL OSCILLATOR

This proprietary oscillator is being developed by David Corna and I. You have not seen it before. Consider it a measure of market rhythm. During an uptrend, the rhythm is steady and during a down trend, the rhythm is more erratic and volatile. The time period of this chart is January to present. Notice that the two recent spikes, circled, are higher than seen during the designated "up trend". This suggests that the market is, literally, tired. A useful analogy is that of a heart whose rhythm becomes irregular during stressful periods.

VOLUME OSCILLATOR

The oscillator above was developed by Terry Laundry. I have boxed two similar periods as well as a projection. This calls for a few more up days before another drop in the indicator and stock market prices occurs. Also, it recently fell below the zero-line, suggesting that it may need to reach an oversold level before a sustained up trend can resume.

VXV:VIX

This indicator is of relative fear. I have circled two bars that indicate panics on a daily level. The panic of four days ago was high on an absolute basis, as well as relative to the fact that the sell off in equities was mild. This suggests that a few more up days are due. However, the trend for this indicator is beginning to anticipate market weakness.

SHORT TERM T

This T expires April 1st, at 11:30 AM. In theory, the market will rise until the T expires. This also suggests some strength in the coming days. However, the payroll report is coming out, which is very important, and will probably command the time and price at which the market makes its short term peak. 

SENTIMENT

The media has turned from bearish to neutral in the last couple of days. It has yet to be bullish but a little more strength will probably be enough. Recall that Dow 11,000 is near.

The 10 day MA for "All Securities ISEE" is approaching 140, a level at which the market usually peaks.

The equity put/call ratio is already at a level signaling a short term top.

The total put/call ratio needs more time to signal a top.

Well, that about covers it. To repeat the conclusions, it seems like the market is topping out, preparing for a correction, but it is possible that a few more days of upside remain. For frequent market updates and projections, please visit my site .

One of the dumbest things that a trader can do is try to predict earnings, economic reports, or the Fed. It is total lunacy! Honestly, it is that home-run, "Make-Me-Rich", something-for-nothing, greedy-for-gain, lazy attitude that causes so many to try to play this nonsensical game. One of the biggest temptations is for the clock to hit 3:58 in the afternoon, knowing there is only a couple of minutes left in the trading day, and to look about 15-30 minutes into the future when a company like Apple (AAPL), or Google (GOOG) or Goldman Sachs (GS) reports their earnings. You say to yourself, "I can go long and benefit from a blow out quarter that I just have this hunch about, so I am going to put my capital all on that stock. 

Then the market closes – you're in before that much anticipated report - then BOOM – 20 news releases hit the wire at once, you are scurrying through each one of them to see what they say. You've got their numbers, now let's see what expectations where – "GREAT They Beat Estimates – I'M RICH!!!"

No you're not!

"What the heck happened, why is this stock down 15% after hours – and how could I have been so stupid to make such a foolish gamble on this play!?!"

This time of year many traders are asking themselves these questions – lured into the hopes of just calling it right, only to be disappointed. And it is not just novices who try to pull off these kinds of shenanigans. Experienced, Wall-Street Professionals do it all the time.

What is even better, is when the earnings report comes out, and it goes your way…but for a while…and then reverses and goes the opposite direction -a classic headfake. There are so many emotions and variables that goes into these earnings plays – don't fall for the trap – you'll most likely pay dearly if you do.

What is even more crazy is trying to play the Fed and their FOMC Statement every six-weeks thinking that you can call it right too. When 2:15 strikes and the report is out, the market tears itself apart trying to figure out which way it is trying to go – and if you are playing the Fed, then you are watching this price action very closely, and with it your emotions, your mind, and your capital is going through the Wall Street Wringer of Portfolio Implosion.

Let's break it down mathematically…

After the bell closes, Google (GOOG) announces their earnings. Now with every earnings report, Fed Report, or Economic report, there is an expectation by the Street of what it will be. The fate of the stock hinges on that report. Now great companies can miss expectations, but it doesn't necessarily mean that they had a bad quarter, instead, it means that Wall Street priced too much optimism into the stock and as a result the share price is likely to drop like a rock.

So as a trader let's say that you have at best a 50/50 chance of getting it right. You don't know their books, no one has tipped you off, and so really it is a crap-shot between right and wrong. Now even if you predict their quarter correctly and how well they did, you still have to predict the movement of the stock price correctly. Just because you guess correctly how their COMPANY does, doesn't mean you will be able to guess correctly how their STOCK will do. They are two separate entities and not fully correlated with each other, believe it or not. So when Google announces their earnings, they can do very well, but the Street can decide to sell the earnings report, and all that studying and anticipation, and feelings of exuberance that you felt upon calling the quarter right quickly evaporates when the stock nose dives.

So since we talked about probabilities already, let's expand on my theory and say that you have at best a 50/50 chance of predicting the market reaction correctly, then in all, you only have a 25% chance of calling a quarter correctly based on your original thesis.

Now some of you will immediately say, "How can you say you have only a 25% chance of getting it right when a stock can only go up or down, which makes it a 50% chance?", and my answer to that would be that everyone who plays earnings does so on a premise of why they will beat earnings. Some will do it because they like Google's new phone, and so does their friends, so they think that everyone else does too, so that means earnings must be great (50% chance at best) and that the stock price's reaction will show that as well (50% chance). A half times a half makes a quarter which means you have a 25% chance of your thesis being correct. Regardless of whether the stock goes up or down, your premise for what the stock will ultimately do, shouldn't be based on a 25% guess.

Earnings season is one of the most difficult times in the market – it is a check-up of the overall economy, by analyzing each of its parts to see which ones are functioning well and which ones are not. As traders, on the outside, we don't have the privilege of knowing how each part is going to do when it is all said and done, and to try and put your hard-earned capital on such a risky gamble, quite honestly, doesn't make sense.

So whether it is earnings, the Fed, or a routine economic report like GDP or Jobless Claims, don't be tempted to trade on them in hopes of hitting a home-run, because in the long-run it is likely you will find your-self striking out.

Check out more of Ryan Mallory's articles and stock ideas at SharePlanner