Test of Resistance

It is no surprising to see DJIA back to the 12700 level, now, the question is what could come next ?

After failing to see further drop off, the "short" covered their track in the last couple of days, this is demonstrated by the quick rise of a lot of beaten down stocks.   for example, AIG, BLK, CPLA and HOLX.   they have been down quite a lot from their highs, but have recovered more than 5% last two days. If my observation is right, other than some "hot" sectors and "hot" stocks, most of gains probably comes from heavely shorted stocks.   

Does this mean Bear give up and Bulls take control from here ?

Hardly.  It has been the case that days leading to FED chairman's speech were profitable. So, the last couple of days, the bulls simply followed the same scripts.   It is also true that this has been more successful for the traders based on the technicals.   Now, if we assume all these still hold true, then, the bull's run may hit the wall soon, or, at least, profitable days like the last couple days will be harder to come by.

Eventually, Fundamentals will determine the fair value of the equities.  With growth slowing (FED said), and inflation threat real,  the market has to overcome a lot of headwinds to achive another level.   For now, it may just trade in a range.

Of course, One has to be flexible towards to the market, if the market turns out to be a lot more resilent than we thought, we certainly to adjust our views.  So, we need to be prepared both ways.