Major indices finished Wednesday well off their highs, although blue-chip averages closed higher for a third consecutive session. But underneath the show of confidence, many stand ready to sell into the rally, as reflected by the afternoon selloff.

The

Dow Jones Industrial Average

0.3% to 10,486.02, but off an earlier high of 10,526. The

S&P 500

added 0.2% to 1,184.07 after rising to 1,189.23 earlier. The

Nasdaq Composite

dipped 0.01% to 1,999.14, after touching an intraday high of 2,017.08.

Breadth remained positive with advancers beating decliners 10 to 7 on the NYSE, where 1.8 billion shares changed hands. Gainers led 8 to 7 on the Nasdaq, where a modest 1.71 billion shares were exchanged.

The rally came under selling pressure several times during the session, seemingly independently of movements in crude oil prices, the market's recent barometer.

Crude oil for May delivery finished down 19 cents to $55.85 a barrel in Nymex floor trading. The latest Energy Department data showed crude inventories rose by 2.4 million barrels in the week ended April 1, slightly more than estimates. U.S. gasoline supplies fell 2.1 million barrels, matching estimates.

Stocks rallied earlier thanks to a Merrill Lynch upgrade of

Altera

(ALTR) - Get Report

, positive guidance from

Autodesk

(ADSK) - Get Report

and despite high-profile warnings from

Forest Labs

(FRX)

and

Siebel Systems

(SEBL)

.

But major indices suffered from strong selling pressure in the afternoon as traders hesitated ahead of earnings season, which traditionally begins in earnest when

Alcoa

(AA) - Get Report

reports earnings. After the bell Wednesday, the Pittsburgh-based aluminum giant posted a 27% year-over-year drop in earnings but beat Wall Street's expectations by a penny.

But beyond news- and economic-driven selling, there seemed to be a lot of players ready to sell into the strength. Does this bode well for forecasts of an April rally?

Bears Get Their Shake

As reported

here in recent days, market gurus such as Don Hays and Paul Desmond are expecting an April rally. They are joined in their call by Wall Street powerhouse Merrill Lynch. Given that a third day of gains was met with resistance, it would only be fair to hear of a more bearish perspective: Who else to do it better than Oppenheimer & Co.'s Michael Metz?

"We're entitled to some short-term bounce," Metz says generously. "But this rally is about 80% done and we can expect Thursday to be its last day."

Putting his money where his mouth is, Metz will be selling into any upside. And that's regardless of whether his own prediction about the length of an April rally holds true.

The upside trend is likely being fueled by money managers bringing back cash into the market at the onset of the second quarter. But as with any trend, it may develop a life of its own. "If you're a performance-compensated manager, you have to be there when the market goes up, so you have to follow trends," Metz says.

But there has been no change in bearish market fundamentals created by financial stresses threatening to roil the market, he says, pointing to the likes of

AIG

(AIG) - Get Report

and

Fannie Mae

(FNM)

.

Supporting Metz's concerns about Fannie,

Federal Reserve

Chairman Alan Greenspan urged Congress on Wednesday to limit the size of the multibillion-dollar portfolios held by Fannie and its fellow mortgage giant

Freddie Mac

(FRE)

. "Without restrictions on the size of

their balance sheets, we put at risk our ability to preserve safe and sound financial markets in the U.S., a key ingredient of support for homeownership," Greenspan said.

Mortgage-backed bonds were hit after Greenspan's remarks; that, in turn, boosted Treasuries. The benchmark 10-year Treasury finished up 10/32, while its yield fell to 4.43%. The dollar, meanwhile, moved to five-month highs against the yen amid expectations that Japanese investors will chase higher U.S. yields at the start of the financial year.

Getting back to Metz, the oft-bearish strategist is a seller not just of financials, but of consumer discretionary and information technology stocks. Yet Metz still likes the energy sector long-term, noting that oil companies still have impressive discretionary cash flow.

"The

Unocal

(UCL)

deal

with

ChevronTexaco

(CVX) - Get Report

is likely the first of many deals to come," he says.

Notably, the last time there were three sessions of gains in a row was the three days ended Feb. 25, and

Exxon Mobil

(XOM) - Get Report

was leading the pack. Any downside in oil stocks likely will find buyers; energy stocks were notable winners Wednesday despite oil's retreat; the Philadelphia Stock Exchange Oil Service Index gained 2% while the Amex Oil and Gas Index rose 1.5%.

Of course, there are risks to energy stocks, given recent efforts to talk down oil prices; most notably Greenspan's speaking of a "price frenzy" on Tuesday. Another opportunity to calm the frenzy -- if it is indeed just that -- may come later this month.

The Wall Street Journal

reported Wednesday that Saudi Crown Prince Abdullah will meet President Bush at his Crawford, Texas, ranch sometime in April.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

your feedback.