Jonas Elmerraji's  Instablog

As expected, the S&P 500 surged another 4% in the last week, making things especially interesting as the nation prepared for the big banks' stress test results and a slew of mediocre earnings... More on that later.

First, here's what's going on in the markets right now:

While the current market situation has been described as one sustained two-month rally, if you take a look at the chart above you can see that there have actually been two pretty distinct rally patterns going on: a gradual stair-step climb, and a more recent unchecked surge.

When coming out of a correction, it's healthy for the market to stop and start – like the stairs above. At each pullback, the market is essentially forming short-term resistance (a price level the market has trouble falling below), a lot like how a mountain climber continuously anchors himself into the face of a cliff.

What's less healthy is the unchecked rally that has followed it. It's inevitable for a climber (or the market) to slip every now and again, but with those anchors spread out every 20 or 30 points the damage is limited. When a climber tries to scale a face without pausing momentarily to hammer any anchors in place though, the chances of falling right to the ground are much worse. That's what's worrying about the market right now.

Maybe stocks will manage to reach the summit without stumbling again, but that's a big "maybe" when your portfolio's on the line. Last week, I talked about the 200-day moving average, a potential stumbling block that the market would have to pass-by in order to continue its climb. We're now just 40 points and change from that level, meaning that a 4.7% move in the market will test its mettle.

I'd recommend keeping a fairly close eye on your portfolio for the next week or so. Keep an eye on your inbox too... I'll be sending out Rhino Alerts when things start to happen.

A "Stressful" Week

This week's big news item was that the bank stress test results came out yesterday. Regulators determined that the 10 biggest banks would need to raise $75 billion in capital in order to handle the contingency of a deeper recession – a number dwarfed by the $600 billion in potential bank losses estimated by the Fed for 2009 and 2010.

Worst on the list was Bank of America (NYSE: BAC), in need of $33.9 billion in tier 1 capital. About half of the banks tested were deemed deficient in capital under the Fed's "worst case scenario" tests, but I have an uneasy feeling that the banks in need of funds have a rich Uncle who's only too happy to shell out cash.

The market reacted by closing down 1.32%.

Saying Bye to EMCOR

Yesterday, the Rhino Stock Report sold its position in EMCOR Group (NYSE: EME) for 42% gains. That makes EMCOR our fourth double-digit sale in 2009. It also means that the Rhino Stock Report's portfolio is up 17.46% since November, a period over which the S&P 500 is down 4.78%. In other words, we're beating the market by 22.24%.

Disclosure: The Rhino Stock Report sold EME on 5/7