Short Yet To Be Paid

The short-term bearish pattern in SPY is still intact but the market is close to invalidating our thought process. The S&P 500 formed an ascending triangle into the strong 880 resistance level. Typically the pattern of increasing constriction of range as a stock moves higher coupled with a major resistance has bearish implications. Upon breaking the rising trendline we believed a short trade had triggered and looked to be short the indexes. So far the market has traded sideways not offering the pull-in we are looking for. The resistance level at 880 has not been violated so the idea remains alive for the patient trader willing to sit through the retest.
Selling pressure in this market will likely be caused by some catalyst. As earnings season mostly finishes within the next two weeks, we are looking at two key upcoming government reports. The advanced GDP report along with the FOMC rate decision this week Wednesday, April 29th, will be market movers. This week's GDP report is largely based on the first two months of the year and will give investors a look into how the economy performed following fourth quarter 2008's GDP of -6.3%. The FOMC decision reaction will be muted but changes in the commentary may cause some concern/optimism exacerbating a move off the GDP number.

The highly anticipated results of the bank stress tests are due out May 4th. With the release of the test details on Friday disappointing most analysts with a lack clarity, there will be more uncertainty going into the result release causing greater volatility.