Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

And there it is, the fourth up day in a row, and the S&P 500 sits above the crucial 1,200 mark with a big smirk on its face. The market-moving story of the day was the announcement of a coordinated effort by central banks (the Fed, BOJ, BOE, ECB) to provide dollar funding, which gave equities a boost that lasted all day. 

Today I want to take a closer look inside the famed bear wedge on the S&P 500. The hourly chart dating back to early August shows a series of higher highs and lower lows. In early September, the index failed to make a higher high, proceeded to make a lower low, and yesterday overcame horizontal resistance near 1,200 ever so slightly on a daily closing basis.

The current best case potential upside target I see remains near 1,240, which coincides with the top of the bear flag channel (parallel white lines) and a downward sloping 50-day simple moving average (not shown), among other things.      

After lagging in recent days, the financials outperformed and led the market higher yesterday. Because the financials are such an important aspect of the broader equity market, it is important that every once in a while we remind ourselves what both the longer-term and near-term charts look like. 

The weekly chart of the KBW Bank Index (PHLX:BKX) shows the big rally off the 2009 lows, followed by a top in early 2010, and a lower high in early 2011. The index currently sits near a critical support area dating back to 2009, as well as the 61.8% Fibonacci retracement level of the March 2009 to April 2010 rally. In many respects this is a last line of support, which should it break, could lead the index to much lower levels.

The daily chart of the BKX shows a cluster of bars dating back to early August that formed a trading range. In the very near term the index may have room to climb up to $40.25, the top of the range, where it should find some resistance. The stochastics oscillator also points to the potential for higher levels.

Should the index be able to coil up enough energy, it may then lead to a break higher and out of this trading range, which could be the beginning of higher prices in banks. Alternatively, if the index breaks out of the consolidation pattern to the downside, and if we refer back to the weekly chart above, we could see a move near the $25 area.

Today is an options expiration Friday, and from a trading perspective (unless you’re an options expiration specialist) this is a less favorable environment. Additionally, after four consecutive up days, the rally may be a little long in the tooth. The setup remains as it was yesterday morning: The charts and sentiment indicate that some upside potential remains in equities, but given the longer-term broken charts, selling into this bear market rally should be the prudent approach. 

• See Sam Collins’ Daily Market Outlook: Charts Say It’s Time to Sell
• See Sam Collins’ Trade of the Day: Top Gold Stock to Buy on a Pullback