Bear Rally Mode

We’ve seen it time and time again this year. The it is the phenomenon of a bear market rally. That’s what happened Wednesday, April 16, with the major averages all surging more than 2% in the trading session.

Now there is no denying we had a solid day of market upside, but the problem is that there is a lot of resistance in the market. As stocks go up, they’ll inevitably run up against technical resistance levels. The key resistance level on the S&P 500 is 1,375, which can be seen in the chart below.

Yes, we are almost there, but not quite. If we see stocks blow past — and stay above — this 1,375 level, we could be looking at a sustained rally. If we fail to go above 1,375, or if we go above this level and then come back down hard, it will be more business as usual in this tough 2008 market environment.