Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

It was another solid gain for the bulls yesterday as U.S.equity indices rallied for a second straight day. Yesterday, we discussed the trading range in the S&P 500 between 1,100 and 1,200. An interesting way to look at this trading range is on the below chart.

In essence, the trading range is between two 38.2% Fibonacci retracement levels. The bottom of the range (1,100) is the 38.3% retracement level of the entire March 2009 to May 2011 rally, acting as support. The top of the range (1,200) is being marked by the 38.3% retracement level of the move down from May to August 2011.

Remember the gaps we also pointed out yesterday on the S&P 500, as well as the sector ETFs? Well, the hourly chart below shows that yesterday they filled about 15 points of the total 30 points in the gap. That doesn’t mean the next 15 points will get filled today, but it does mean that if you played the gap you should have taken at least partial profits at the end of yesterday. That’s what good risk management dictates.

Financials had a great day yesterday, and in terms of sectors, were the strongest performer second only to utilities by around 50 basis points. JPMorgan (NYSE:JPM) is the stock in the financial complex we keep our focus on, and the hourly chart displays the still unfilled gap from Aug. 18 (much like the S&P 500). Also note the downtrend line originating back in late July coming into play here. We can use this chart as a proxy for the financials.

The better bid equities over the past two days have, of course, correlated with weakening (read: plummeting) gold and long-dated bond prices. In the case of gold, if we look at the below chart, we can see how since early July the steepness of the move has ever increased until finally, on Tuesday, it failed and broke through the first two trendlines. The third (and flattest) one remains to be tested, and I expect prices to at least get down near $168 on the SPDR Gold Trust (NYSE:GLD). I’m not questioning the longer-term point of holding gold in a portfolio, but if this metal can drop 8% in two trading days, does it still qualify as “safe?”

And that’s about where we are. Heading into today, and then especially tomorrow, I want to keep my bets small and spend most of the time watching from the sidelines. The rally over the past two days was nice, so I booked some long-side profits and remain waiting for a potential break above 1,200 in the S&P 500.

There is no edge in trying to game what Fed Chairman Ben Bernanke will or will not say on Friday. Couple that with the trading range in the S&P 500, as discussed above, and the fact that late August is vacation time, and taking some time and risk off sounds like a good trade to me.

• See Sam Collins’ Daily Market Outlook: Don’t Put Too Much Faith in This Rally
• See Sam Collins’ Trade of the Day: Sell This Semi Stock Into Rallies
• See Serge Berger’s Trade of the Day: Estee Lauder Looking Like an Attractive Buy