S&P range – where next?

I have a foot in each (Bear/Bull) camp at the moment… on one hand, the S&P clearly broke down from a rising (bearish) wedge earlier this month.  Pronounced relative weakness from emerging markets, junk bond markets and commodities leads me to believe that U.S. equities are pricing in a very optimistic reality relative to those other markets.  I suspect that U.S. equities are mis-priced and will have to adjust downward in the coming months.  But if 2012 follows the pattern of the previous two years, we may have one more new high yet to come.  So what comes next?  A run to new highs or a realization of deflationary pressures?

There appears to be a fairly delineated range we can establish from over the last couple months.  We are testing the top end of the range today.  It’s possible (likely?) that a break above recent highs can propel the market to re-test its old highs or even establish new ones before more pronounced weakness emerges in the summer.  Hourly ES (e-Mini S&P Futures) chart below:



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