History tell us that in a bear market investors should sell on rallies in extreme complacency while traders should pursue bearish strategies on the short side of the market.

The S&P 500 Index dropped 9.2 points, closed at 1137.03. Broad-based selling dropped stocks for sizable losses Monday. The slide found support at last week's lows, though. Stocks finished near session lows Monday following a midday sell-off, as investors remain cautious ahead of corporate earnings season and key employment data due later in the week.

Upside volume is light and continues to lag downside volume. This is troubling because the implication of higher downside volume is that the bears are still in control and that the current rally may be failed. The Fed is pumping money into Wall Street through its Permanent Open Market Operations (POMO). This operation allows the Fed to buy Treasuries from primary dealers. The dealers then take this money and pump it into stocks, which in a low-volume situation with few sellers and even fewer buyers creates a run on stocks on low-volume days.

In the meantime, as a rule, you should buy on support, and sell on resistance (buy low, sell high) until the market tell you not to do so. That is, follow this rule until market break either support or resistance with directional move. It sounds simple, but it takes an enormous amount of discipline to consistently apply the rule, especially if you are listening to cross-currents of opinion. Whether you’re a bull or a bear, if you follow your trading rules, you will be a winner.

Look at the big picture, the secular bear market is still with us, and history tell us that in a bear market investors should sell on rallies in extreme complacency while traders should pursue bearish strategies on the short side of the market.