Well, that was entirely predictable. The last trading day of the month combined with a big dud of an announcement from the Federal Reserve and stocks sold off late in the day, Wednesday. Could this be a sign of things to come for the month of May?

I think so. The market has been on a tremendous run since the Bear Stearns (BSC) bailout with April being the first up month in who knows how long.

Noticeable in the rally are two fairly basic technical observations. For starters, the rally started at the approximate low for the S&P 500 first hit in January of this year. Secondly, yesterday's gains peaked at a key barrier to future gains at 1,400.

If you look at a chart of the S&P 500, one thing becomes abundantly clear in the pattern formed during the course of this year. It looks to me to be a reverse head and shoulders chart.

Now mind you, I am no technician as my background is in fundamental analysis, but I am open to using charts in formulating my qualitative opinions about the market.

In this case, I can say with a high degree of certainty that we have one more leg down here. It was no coincidence that the market rallied off the lows in March, and it should be no surprise when the market bounces off the 1,400 level only to retest the lows one more time.

Unrealistic Market Expectations

It all makes a ton of sense, especially if you consider...