On May 5th article I posted a chart click here; that I pointed 3 scenarios. So far my bearish scenarios has play out. What I like to see at this point is a strong short squeeze that ignite a strong rally. so far all we got was organized sell off. S&P500 hit the lower side of up trend channel(see the chart in yellow). Since August of 2010 S&P500 has hit it 3 times. As long as S&P500 would not violate this channel, bulls have the upper hands. If S&P500 stays below this channel for a couple days it means S&P500 is headed for 1274-1260 in coming weeks.
In the last 4 weeks S&P500 has moved in a narrow channel(see the chart in blue). this channel could interpret as bull flag. This is a very bullish formation, but there is one problem. Bull flags usually last 3 weeks. It means if we close this week negative, bulls will be in trouble.
bull flags usually give us 55% possibility of break to the upside. We shall wait to see what is going to play out.
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S&P500 technical analysis chart May 5, 2011:
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