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By Lawrence G. McMillan

A week ago, we stated that the market was at a crucial juncture — that it had rallied to the 1,220-1,230 area on the Standard & Poor’s 500 Index and that it was either going to break out to the upside or retrace to the bottom of the trading range. What has happened is that the market has remained volatile around that area, but that so far there has not been a resolution of the bullish and bearish forces.

Today’s action is the most serious selling we’ve seen in a while, and it comes after the bulls attempted to move the market higher in a monster rally yesterday (Tuesday) and this morning. I would have to say the bulls are out of gas at this point. That doesn’t mean we immediately retreat to the lower end of the trading range (1,070-1,100), but it does mean that there will likely be a test of the support at 1,190. Should that fail, the 20-day moving average is near 1,170. Any lower than that and there likely will be a retest of the lows.

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