Although stocks are managing to show considerable resilience since rallying off their February 5 lows, a significant portion of overhead supply remains.

After the close of yesterday's trading, the Federal Reserve Board raised the discount rate, the rate at which banks lend each other emergency overnight funds, by a quarter-point. Though economists widely expected this to happen in the near future, it was a bit surprising the Fed did not wait until the next FOMC meeting to make such an announcement. The unexpected rate increase immediately sparked a sell-off in the after-hours futures markets, which is apparently carrying over to this morning's pre-market session.

Deron Wagner does not recommend selling short into strength of a market that is grinding higher every day.

Deron Wagner did not grab any new long positions over the past few days. Instead, he feels it's a better reward-risk ratio to wait for weak ETFs to rally into key resistance levels, then initiate new short positions.

The market is starting to look better in the near-term, but a rather healthy dose of caution is still required on the long side.

Since none of the broad market indexes moved above their February 9 highs yesterday, traders should be monitoring those same pivotal levels going into today.

A rally above yesterday's highs would correspond to a breakout above the downtrend lines that have been in place for more than three weeks.

Now that the stock market is clearly in correction mode, fixed-income (bond) ETFs have started seeing buying interest.

The S&P Midcap SPDR (MDY) is the only broad-based ETF still trading above its late-November 2009 lows.