Keeping well in mind that NOBODY knows what happens next, here is my view of the probabilities for the market for the week of 4/27/2009. The strong and historically breath taking rally we have witnessed since the March lows seems to be a bit long in the tooth.
Historically, bear market rallies have a duration of 17-25 days. I also note that the amount of energy (volume) expended for incremental increase in price shows slowing momentum. April, typically, is a counter trend (sideways price action) month. We have, indeed, observed a large number of choppy days. The opening gap created on Monday April 20th was filled on Friday.
Overhead resistance mounts the further north from S an P 875 the market goes. As I do not believe, presently, that the rally we have/are witnessing is the beginning of a new bull market (take note that the January and February highs of this year have not been breached thus, no higher highs), the higher probability for this weeks price action is down. Measured by the S and P, I am looking for a move down to the 805-820 level and a possible move as low as 780 if 800 is breached.
Basically, continued price movement within the channel with a downside bias. Any further moves to the downside I would anticipate in May. Formal announcement on May 4th of Bank Stress Test Results could be a game changer. I believe it could raise more questions than answers to the detriment of the bulls.
