“Blessed is he who expects nothing, for he shall never be disappointed”

--Alexander Pope

• The market’s momentum seems to have stalled over the past few weeks, as stocks continue to digest the roughly 40% rally from the March lows. Confidence that the Armageddon scenario is likely off the table supported much of these initial equity gains, but now investors are searching for tangible signs the economic recovery is under way, as opposed to merely a decline in the rate of change of disappointing data.

• With increased expectations versus what will likely continue to be a mixed bag on the economic front, at least in the short term, we suspect equities will be confined to a trading range in the near tem as investors await the next catalyst. From a technical perspective, we see resistance for the S&P 500 at 956 (recent peak) and estimate downside support at 880, then 825.

• Indeed, the process of two steps forward, one step back is to be expected, as stocks almost never move up in a straight line. As an example, Figures 1 and 2 show this stair-step pattern was also apparent during the rebound from the bear market lows in 1974 and 1982, and, so far, the current market’s recovery path has tracked these two cycles rather closely. These comparisons almost always eventually diverge, but they are simply meant to provide context of past market rebounds (charts courtesy of Ron Griess from thechartstore.com).