trading pattern on the S&P 500 index suggests strongly that the market could be in an early stage of establishing a near-term high and that short-term condition is ripe for some short of pullback consolidation. However, as long as the S&P holds above the February trend-line, the coming correction might be just another blip in the multi-month rally, which will help setup a much more potent buying opportunity

the S&P appeared to have established an important near-term low on its most recent downturn. After eclipsing minor resistance at 1083, the next level that traders will be watching is 1103. A sustain breakout above that level should send short sellers scrambling hence, opening up for a test the January high of 1150. And an abrupt downside reversal from that level, meanwhile, will raise the odds for a retest of February low of 1044.

Capital Essence’s “ETFs Trading Map” for January 19, 2010: “…Commodities ETFs: last week we’ve said that: “USO had rallied to test resistance at the top of its short-term trading range. The overall trend had turned bullish…although let’s noticed that it’s now nearly short-term overbought following recent advance, so we’re not expecting much more upside without at least some consolidations first.” As anticipated, USO pulled back to test support at 38.23, or the white line in the chart. The overall trend had turned…” Subscribers, please login to read more.

Wednesday’s reversal could be a beginning of the overdue short-term overbought correction. With that said, there is a good chance that the sell off will momentum, but a much deeper slide is needed to erase the long-term uptrend

the overall technical backdrop remains bullish and should continue to provide foundation for further advance. However, the S&P is now short-term overbought as it encountered key resistance level, so we could have prices drifting in either direction with bias to the upside over the next couple of days