The market is extremely technically damaged. looking at the chart pattern what will happen? Again 2010 is turning out to be a trader's market where one has to be fast and nimble. It won't be a very productive year for buy and hold investors.
Looking at the chart, one can argue that we have a bearish flag continuation pattern. But is the market really ready to roll over and die at this period of time? Probably not, but we have to be flexible to that idea. What might be a more likely scenario is that we have a short term W bottom, and the market will rally a bit from here after of a lot of choppiness to shake out the small people. If the market rallies from here, we'll see heavy resistance on the SPY at 111 (one of the orange lines on the chart). That also happens to be where the 200 DMA lies and the 38.2% fib retrace from the recent highs to the recent lows, so expect that to be a resistance point, but it seems likely we'll at least see 111 in the next few days.
What's next afterwards is anyone's guess. We can roll over and die from 111, or we could continue an advance to 116 on the SPY also where the 50DMA lies and the 61.8 fib retrace from the recent highs to the recent lows. Expect that to be a major resistance point.
What would happen after that? Ultimately I still think the economy and the market is in real big trouble, and I really do expect to see new lows for the year. If you look at the chart of oil (USO), and Goldman Sachs (GS) you'll see what I mean.
