Market Rally fueled by BP?

The news seems to be encouraging in the Gulf as BP was able to place a new cap on the spewing wellhead in the gulf. Now they need to shut the valves off and determine whether pressure rises, or escapes from a broken well casing. Many experts have expected that this inner pipe well casing was breached earlier, like a leak in a garden hose, and it's eroding the sea floor around that leak. If true, this would mean the cap would not resolve the leak, but only enable them to collect more oil from the leak, while we wait for the relief well teams to intersect with the well bore.

BP caps well for good?

The question is how much the market will care about this. Will this be sufficient to bring out the buyers, as well as scare the bejeezus out of the shorts, therefore bringing the DOW back up to over 10,600, and the S&P back up over 1220 and mitigating/nullifying this Head & Shoulders formation that recently broke it's "neckline" and triggered a market sell-signal?

Or will this be the opportunity the "bag-holders", who missed the opportunity to sell earlier, are counting on to off-load their portfolios. It all hinges on the above market levels according to Darryl Guppy, a noted Technical Analyst:

Reversing the Head & Shoulders

Right now futures are up 74 points on the DOW, but it's dangerous to believe a pre-market "gap up" as they are usually sold off. I'll personally remain unconvinced we've turned this market direction around, avoiding a breakdown of the previous neckline area until we've hit those levels described by Darryl Guppy as we're currently in serious resistance areas that almost demand a retest of previous lows. Furthermore we're looking at 6 up days, which is generally near the top of most market rallies. PSA's market read from last covers this pretty well:

Low Volume Market rallies fail

We're also in earning season so it may be that this week is the one chance for the Bulls to resume control over the markets as the post-news market is historically weak through August and September as traders take vacations.

Additionally, even though THIS short term H&S formation might become neutralized, we still have that 12 year H&S formation that is going to require some MAJOR work to overcome over the remainder of the year:

Mother Of All Head & Shoulders

Finally.. here's a little tidbit that I thought summarized the sub-prime market crisis and how Federal Stimulus has facilitated placing the burden of this mess on the backs of the taxpayers. It's pretty interesting reading:

Con of the Decade

And if that article isn't bad enough, here we have the Chinese cutting our Credit Rating:

Chinese Pot calling the kettle black?

Yeah.. I know China has tremendous reserves, but the bubble that has been created in the Chinese economy has rendered the majority of their Real Estate loans to be extremely suspect.

As I finished typing this, it seems likely that the gap up in this market will sell off. The question will how far the selling momentum is carried. We'll have to look at retail sales tomorrow morning as an indicator for the status of the US consumer.

Scrutinizer