After several days of wild, highly volatile swings, the stock market didn’t do much of anything last Thursday and Friday. The S&P 500 closed last Wednesday at 2752. And that’s exactly where it closed on Friday.

The limited action has relieved the overbought and oversold conditions on various technical indicators. Most indicators are now in neutral territory. So there’s plenty of energy to fuel a larger move in the market this week.

And, I suspect that’s exactly what we’ll get… in both directions.

Let me explain…

I’ve been playing “connect the dots” on the daily and intraday charts of the S&P. There’s a familiar, consistent pattern emerging on all of them. Take a look at this daily chart…

The chart is forming a bearish rising wedge pattern. So far, though, we only have two tests of the resistance line. For a proper wedge, there needs to be at least three. So, it seems reasonable to expect the market to attempt a rally from here.

Also, you can see how the 9-day exponential moving average, the 50-day moving average, and the support line of the wedge have all come together at about the 2749 level. The market is unlikely to break down below all of that support on the first attempt. The odds favor a bounce.

Maybe over the next few days the S&P can get up near 2800 again. That would be the third test of resistance, and it would provide a great, low-risk short selling opportunity.

The most logical move from that point would be back down to test the support line of the wedge, and possibly a breakdown from there. That could lead to the “retest” of the lows I’ve been harping about for the past month.

So, if the market rallies early this week and the S&P 500 can get up closer to the 2800 level, and if we start to get overbought conditions on the various technical indicators again, then that’s where traders ought to start looking to add short exposure.