Bears were very excited about the pullback from the double-top yesterday. I've been considering this carefully this morning, and the evidence for an imminent pullback doesn't look overwhelming to me as yet. The bear case for the next few months is very compelling, is supported by numerous patterns, and it has economic logic behind it, but it still isn't necessarily going to happen.

One of the most compelling patterns for it is the possible bearish gartley pattern building on SPX. Here it is in its full glory:

This pattern came into focus when the move from March 2009 peaked at an almost perfect 61.8% retracement of the 2007-9 bear market. While most would doubt that we could move down to the 870 area and then move back up to challenge 1350 to complete the pattern, I think it looks very feasible as the first leg up would be QE1, and the second would be QE2, with the whole forming an ABC corrective move before another bigger move down. If SPX drops back below 900, I would expect that there would be another big stimulus package and the quantitative easing printing presses would be run round the clock to try to reinflate asset prices in the fond hope that this would revive the economy. That would probably work, for a while at least.

After a year or so of QE2, and the unprecedented fiscal blowout that went with it, I'd expect a bond market revolt to rein in  government spending and to shut down the printing presses, and then we'd have the final bear market of this secular bear market cycle, uninterrupted by these tedious and counter-productive keynesian interventions.

I'm working on a full post fleshing out this scenario and will definitely have it posted this weekend.

Short term I'm seeing no technical damage as yet to the  multi-week uptrends in the two most important markets that I am watching, namely ES and EURUSD. ES is still in the rising channel that I proposed as a likely candidate at the beginning of last week. Support is at 1074.5 today, and only a close below it would unambiguously open the path to new lows. The increasingly impressive looking IHS that I suggested might form three weeks ago with a bounce off 1130 ES to make the right shoulder is now well advanced and looking increasingly scary from the bear perspective:

EURUSD is much closer to a breakdown, and tested support on the broadening ascending wedge again last night, but support held, and only a close below that lower wedge trendline, currently at 1.279, would open the path to new lows for 2010:

Short term on ES the double top that we have seen on ES the last two days, coupled with the three bounces off the strong resistance turned support level at 1084.5 since ES broke up through it, give the look of a (70%) bullish rectangle with a target at 1112.5. A break downwards with conviction through 1084.5 would open the way to a test of main rising support since the July low at 1074.5. A conviction break of 1074.5 and close below it would clear the technical path towards new lows for 2010 with a likely target IMO below 900 SPX, but I'm not going to get excited about that until I see it happen:

The copper chart still looks fairly bullish, as the broadening descending wedge defining the recent pullback broke upwards last night, and the action over the last few weeks has something of the look of a bullish pennant. We hit a major resistance area overnight though, and we could easily see a pullback here:

As I write I see that ES has plunged down to test 1084.5 again, but it is holding so far and EURUSD has been moving up while ES has fallen. We'll see how that develops today, but on a swing trader basis, there's nothing to see here yet.