End of Rally?

On Monday April 20, market traded significantly lower, perhaps signaling the end of the 6 week long rally off Mar 9th low. With a fair amount of earning reports out of the way, it would have been quite ideal to start a retracement then. But the market decided to overshoot to the upside. And the catalyst that is extending the rally is the bank stress test. Once thought of as a no-win situation, bank stress test is now providing transparency to the banking sector, inticing investors into beaten up bank stocks.

We are now in the 9th week of this market rally. While it's been rather frustrating waiting for the inevitable pullback to this rally, the wait may be over. Market has been trading on decreasing volume since April 20th. Tech underperformed the market today as it battles its 200dma. Art Cashin has warned of a sharp pullback since last week. Carter Worth has exited long positions at the 875 level on S&P. Fast Money traders have advised taking profit for about a month now.

While all of those are quality indicators, none may be more important than the loss of the catalyst itself, the actual release of the bank stress test results. The delay had given it a few more days of life, but it finally ends 5pm est tomorrow. With daily doses of leaked info regarding the test results and subsequent rises in bank stock prices, I don't believe there's any more bullishness left on this catalyst. And with the long summer ready to begin, there's really nothing left to look forward to for the bulls after this one. It'd leave the bulls in a very vulnerable position against the charged up bears after running the show for 9 weeks.

I wouldn't be surprised of an anticipatory downward move tomorrow in the market. But I think the real damage can be done friday morning when the stress test truly becomes a thing of the past and the unemployment number comes out. I shy away from making market predictions these days, but the fundamental reasons stack up quite nicely to call for a possible end to this rally.