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Many are touting Wall Street’s rally is running out of steam as the S&P 500 retreats from a 2010 high and the resistance at Key levels looks too much for the market to absorb.

The index so far has been unable to move above 1,228, the key resistance level, and the chart is starting to form a classic double-top formation, one of the most bearish signals possible.

I have bought ahead of a data-heavy week that I feel will give investors hard evidence to justify a rally that lifted the S&P 500 16.8% from its August 31 close to the 2010 closing high it hit last week.

The data should be sufficient to see 1228 fall and a new rally begin. Such a rally will fuel a Commodities Super Cycle the Paul Ebeling has noted this weekend ahead of Mondays open.

At this point there is no doubt the market is very susceptible to a pullback, the market looks set to go a little lower, however some clarity on US Fiscal policy and data reflecting even a mild recovery will see a change in investor sentiment.

Last week, the Dow Jones industrial average and the Standard & Poor’s 500 index  each fell 2.2 percent. The Nasdaq Composite index lost 2.4 percent.

The S&P 500 hit the 61.8 percent retracement of its slide from the historic highs in 2007 to the low in March 2009.

This was the second time the index moved away from the resistance at 1,228 and its chart could be drawing the dreaded bearish double top formation.

The last retreat from that level, in April, was the start of a correction that took the S&P to its 2010 low in July. Needless to say, it is a dangerous week coming.

The S&P 500 fell below the 20-day moving average for the first time since September 1 but managed to rally and close above the line in a sign that that level, just above 1,194, has strong technical support, that combined with positive news and investor sentiment could push the Index over 1228.


On the big news list this week is the meeting Thursday between U.S. President Barack Obama and congressional leaders to discuss policy and tax cuts.

Republicans have vowed to force a full extension of all tax cuts enacted during the administration of President George W. Bush. Otherwise, the tax cuts expire at the end of 2010.

Most of Obama’s Democrats favor extending tax cuts only for the first $200,000 of income of individuals and $250,000 for families. It is estimated that the Tax Cuts added significantly to USA GDP, anything but a full extension will hurt the market, for now.

In January the Republicans become a major power player in US policy and it may be back on the table.

The big numbers this week are abundant, from manufacturing to leading indicators to retail sales, and, perhaps most importantly, inflation will return Wall St investors’ attention to market fundamentals.

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