Stock market bulls made a valiant effort to fight off another looming correction last week. The economy is showing strong signs of recovery, the Fed remains confident enough to continue its stimulus tapering, and attractive alternative investments to the U.S. stock market seem scarce. Yes, bulls are all dressed up for more fun times. However, the technical picture paints a different story, at least for the near term.

The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.

Despite an environment of uninspiring economic reports, stocks have regained their footing once again. Last week, bulls found that they simply couldn’t ignore the Boston bombing like all the other worrisome news, but the quick capture of the perpetrators has removed the domestic terrorism cloud.

Congress got its act together just enough to stave off the fiscal cliff. Unfortunately, they merely added a long “pirate plank” to the edge of the cliff, as spending was not addressed. So the country has stepped off the cliff and now we are “walking the plank,” albeit without the blindfold since we know when the debt ceiling and sequestration are scheduled to kick in.

Volume remains low as the bulls continue to await Wall Street’s return from late summer vacations...and a firm plan from the central banks. (I think many portfolio managers must be spending their days in the stands at the U.S. Open tennis tournament.) The S&P 500 closed out August with a third straight monthly gain.