The bear continued to rule the markets last week despite strong GDP numbers and the re-confirmation vote of Fed chairman Ben Bernanke. Initial GDP numbers on Friday signaled that the economy grew 5.7% in the fourth quarter of 2009, .3% higher than expectations. Consumer spending also increased 2% and business investment 2.9%.

Solid earnings announcements were also unable to stop the downward momentum last week, despite strong showings from Amazon (AMZN), Apple (AAPL) and Caterpillar (CAT), among others. The bears are calling this the sign that a top is in.

The perplexing question is why the markets are selling now when the economy appears to be turning the corner. Various indicators have pointed over the last few months to resumed growth in jobs, the economy, and housing.

While the selling last week did not nearly match that of the second week of January trading, it was still bearish. Heavy selling came into equities in the last half hour of trading on Friday, which makes the picture even bleaker for the bulls. The 200-day moving average for the DOW sits around 9,750, which could very soon be the next stop for the index.

The Russell faced heavy selling pressure last week, retreating all the way back to support at the 602 level. Those waiting for a pullback to get long the index look to be in a good spot to do so. A close below 600 could signal more selling ahead, so keep stops tight.

Short-term we are looking for a bounce in equities and the Russell as well, with a end of week target of 625. Economic indicators remain strong and we expect continued strong earnings announcements that could lead to an end of week short squeeze.