In my

April 13 column, I said I was betting on a near-term low approaching and explained that there were several indicators showing this. These included the McClellan Oscillator, which was just coming off an extreme oversold reading of -200 at the April 11 close, and the VIX at a two-month closing high of 13.

I was looking for the first attempt to get through 1301 in the

S&P

futures to fail, but I also said I wouldn't be at all surprised to see the S&P pop through this area and trade back up to the resistance at the 1310-11 level in the days ahead. Well, that was something of an understatement, as the S&P has now made slightly higher multiyear highs as of Thursday's close.

After this rally, many things have changed, and I am no longer interested in making bullish bets.

For one, the

Dow

rallied 345 points from Monday's intraday lows to Thursday's intraday highs. That's a long way in such a short time -- not to mention that the run has also included the widely celebrated new six-year intraday and closing high in the Dow Jones Industrial Average. That alone should be reason to turn anyone cautious to bearish on the market.

But there's more.

There was Thursday's new intraday high in the S&P 500 (cash and futures) and the quick pullback of 12 points in the cash and 13 points in the futures, following the obligatory running of stops above the prior highs (see the S&P chart below).

Then there was the double-top high in the

Nasdaq Composite

and the subsequent 20-point pullback to the session lows, followed by a negative close.

Another negative was the action in the Russell 2000, which stalled on Thursday and closed marginally lower.

And then there was the negative breadth on both exchanges, even though the Dow held onto most of its earlier gains.

The McClellan Oscillator, while not yet overbought, is no longer oversold. But other indicators, which don't reflect the collapse in bond-related ETFs, have gotten pretty stretched.

Also there's the VIX, which tipped us off to the latest rally, signaling that it is again time for a little caution. Last week, after the VIX had made that new two-month closing high, I discussed how just as we look for another near-term low, there will be those who will view Tuesday's new closing high in the VIX as a sell signal. Accordingly, they will be selling short Wednesday, in part because of the new high in this indicator.

Now as the VIX pulls back, these same guys will rate this as bullish and will no doubt be buying at multiyear highs. Again, I won't complain. We need these guys. Last week's reading in the VIX was rated another short-term buy signal.

But that was before the latest 345-point rally in the Dow off of this Monday's lows and the pullback in the VIX to yesterday's low of 11.02. At current levels, the VIX is not yet screaming sell, but it is no longer telling us that we can afford to be complacent about the downside. The VIX is suggesting now that it is once again time for some caution. At a minimum, it is probably time to take some profits in long positions.

Pulling Back Following Its Recent Buy Signal

Click here for larger image.

Last week we were betting on a near-term low approaching, and now that the Dow has rebounded over 340 points, the easy money on the upside has clearly been made. There may be higher highs ahead, and there will no doubt be the usual chorus of "the bull market lives -- time to buy stocks!" But this crowd will likely be buying into a top, just as they have bought into every other top (and sold every low) of the past year.

This is not the time to be buying, any more than this past Monday was the time to sell.

Granted, the market may be poised for a breakout above the prior highs, but it could just as easily stall in that area and turn back down.

So buying in this area is not the kind of bet I want to make, especially during an expiration week, as it is simply no longer attractive on a risk-reward basis.

The S&P futures presents the picture of a market at a crossroads.

As you can see in the chart below, the S&P has now cleared the resistance at the 1316 level and has now made a marginally higher high above the prior quadruple-top highs at the 1321-22 level.

For the moment, this move to slightly higher highs has the look of the obligatory stop hunt above the highs and little more.

But again, there are lots of calls for a move up to the 1327-28 area of the futures, and I have to wonder whether the crowd looking for such a move will be accommodated.

For the moment it's a tough call, but I suspect it won't quite get there on the upside.

Looking to the downside, very short-term we have the resistance turned support at the 1316 level. Below that is the support at the 1310-11 level and below that the pivotal 1301 level.

That is probably the worst case over the short-term, even though Tuesday's gap at the 1293 level, which will have to get filled at some point, is not far below. But it probably won't get filled right now.

For the short-term, the important level to watch is still the prior highs -- the 1322 level up to Thursday's higher high of 1324.70.

If those are exceeded, then I would look for a move to 1327, give or take a point.

For now, in the short-term, I suspect that's probably the best case for this move.

S&P Futures on the Continuation Chart
Running the stops above the highs

Click here for larger image.

As for the NDX, the lines in the sand are pretty clear-cut.

Right now, a move above Thursday's high of 1741 would appear to point somewhat higher, possibly up to the April 7 high at the 1750 level. It is this level that is now important as the remaining barrier to a challenge of the old Jan. 11 high of 1761.48.

A move above that level would no doubt be confirmed by new highs in everything else, and should open the door to a further rally as buy stops are triggered and more short-covering pushes prices still higher.

But first things first, and that means a move above the April 7 high at the 1750 level. That will likely take some work, especially if it doesn't get done during this expiration day: A new high in the Nasdaq Composite above Thursday's double-top highs at 2375 would be a spark in the right direction.

On the downside, there remains the unfilled gap from Tuesday's higher opening.

That gap gets filled at the 1694 level and that is probably the worst case over the next couple of weeks. And though I fully expect this gap to get filled, odds are good it won't get filled over the next few days.

In fact, for the very short-term, the 1720 level appears to be back at work as support, and this level could hold for a further rebound that would be capable of challenging the recent highs.

Again, this is not a bet I am going to be making, but it is certainly a decent possibility for this expiration week.

Next week, I will be looking for some consolidation of this latest advance, particularly if prices move higher into Friday's expiration.

More than likely, any such consolidation (expected next week) will return prices to the 1710-11 level and quite possibly to the bottom of the channel near 1700, and maybe even to the gap at 1694. But I won't be holding my breath.

Nasdaq 100 (NDX)
Heading for a challenge of the prior highs

Schiller is owner and editor of the Short-Term Consensus Hotline. He is a stockbroker and options principal with brokersXpress, inc. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he appreciates your feedback;

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