In the very short run it is not very surprising that the market is pausing after a 90 point run in the S&P 500. I believe the most likely outcome is that the market maintains an upward bias through the end of this week. Sentiment indicators have plenty of room before they are an issue for the market and we will not be overbought until the end of the week.
The biggest risk I see to my upward bias is more problems out of Europe. Italy has watered down its austerity plans and the bond market is not taking it kindly. Our markets have managed to decouple somewhat from European markets recently and have been outperforming. That can only go on for so long as further European woes will eventually weigh.
While I remain constructive and net long I have used this rally to take some precautions by putting on partial hedges last week and writing some covered calls yesterday. Additionally, my longs are businesses that I believe will hold up well in a slower economy. My style is to buy into weakness and sell into strength.