Family Dollar Stores (NYSE: FDO), like Dollar Tree (NASDAQ: DLTR), is benefiting from the soft economy. Consumers love paying low prices, so they flock to these retail business models like moths to a flame. And judging by Family Dollar's Q4 report, people are still having a great time saving money.

Net income increased over 13% to 43 cents per share, which was two pennies higher than Wall Street's forecasts, according to our earnings preview. Unfortunately, sales weren't so great. Total sales went up 2.6%, and same-store sales saw a mere 1% gain. I would have expected higher growth in the comps metric.

Even if prices appear to be clawing their way through the overhead supply at around Dow 8,000 and S&P 500 825 to 875, the going is getting tougher.

The highest that the S&P has achieved so far was the high of Thursday, April 2, at 846, before it was turned aside on a minor reversal this Tuesday. Volume has been on the low side on both advances and declines, but this week that was no doubt due to the impending holiday weekend.

As the three-day Easter weekend approaches, volume is declining as both traders and investors shy away from a market that is fraught with uncertainty.

Not only are the Q1 earnings in doubt, but longer-term economic analysis by the ChangeWave team indicates that we can expect to see a trading range of 700 to 900 on the S&P 500 for at least several months. And this is supported by my own technical analysis.

After a discussion of many of the risks peculiar to this economic cycle, the ChangeWave team appraises the big economic forces that "simply have to play out over time."

Monday was a day of crosscurrents and even though late buying recovered some of the earlier losses, it was the first loss in five days -- leaving the bulls wondering if the buying had reached its apex.

The Dow dropped below 8,000 yesterday, but that might not be as significant as the overdone internal indicators on all of the major indices. These indicators tell us when markets are overbought or oversold based on historically relevant studies.

With the best four-week performance since 1938 behind us, with the markets up more than 23%, many analysts are wondering whether that sort of performance can be maintained.

This weekend, Drew Kanaly of Kanaly Trust said he was "highly skeptical" that the rally could run any more than a couple more weeks, and attributed it to extreme oversold readings following Treasury Secretary Tim Geithner's "ill-received speech of Feb. 10."

And Mark Arbeter of Standard & Poor's agreed with him. But Mark is still looking for the S&P 500 to run to "875 to 890 before a major correction sets in."

Despite some last-minute profit-taking, stocks ended Thursday with impressive gains -- spurred on by strong economic news from China, a seemingly successful meeting of the G-20, and an easing by the Financial Accounting Standards Board (FASB) of mark-to-market rules for banks.

The gains were made despite worse-than-expected weekly jobless claims. Initial claims jumped 12,000 to 669,000 versus an expected total of 650,000.

Even though Friday's and Monday's selling moderated some of the overbought internal indicators, those indicators -- chiefly the Moving Average Convergence/Divergence (MACD) and Stochastic -- are still very overbought, and momentum has fallen to the point where it will take some hefty volume to make a meaningful turn up again.

And speaking of volume: Just when the bulls need a big chunk of buying to penetrate into the massive overhead beginning at S&P 500 820, volume contracted yesterday to just 1.5 billion shares traded on the NYSE.

Yesterday was the last day of the quarter and, as usual, institutions were positioning some stocks that already had gains, a practice that Wall Street calls "prettying up portfolios."

But the last 45 minutes of trading may have revealed the true trend, as sellers drove the Dow down more than 115 points on the highest volume of the day.

The good news was that the major indices managed to hold above their respective 20-day moving average lines. But the S&P 500 failed to hold the 800 level, and many technicians felt that it was necessary to stay above that "psychological number" if the rally was to continue.

Monday's sell-off was caused by the forced resignation of General Motors' (NYSE: GM) chief, and the threat that both GM and Chrysler would face bankruptcy.

This classic example of a news-triggered correction, or perhaps even a confirmation of the bear market, came just as stocks were broadly overpriced.

In addition to a sell signal from most of the internal indicators (most graphic being the stochastic), the close below the psychologically important 800 number on the S&P 500 and the Dow's failure to surmount 8,000 sent a clear signal that prices are headed lower.

Most technicians agree that the rally from the January lows is now overextended, and whether you are basing the resistance on Fibonacci numbers at S&P 500 833 or 838, or various support and resistance lines at 836 to 850, or internal indicators, you would have to be an overenthusiastic bull to take many new positions now.

Even though the downside volume shrank to just 1.4 billion shares on Friday on the Big Board, there is other evidence to suggest that the current rally has already topped or is about to.

The S&P 500 is up almost 25% from its March 6 low, and is knocking on the door of the widest and deepest resistance zone in the bear market at S&P 820 to 920.

Yesterday, we discussed the analysis done by Mark Arbeter of Standard & Poor's. Mark concluded that the market is due for a pause and then a "decent advance" before we see another correction.

He ended his report with, "We would use any strength in the stock market to lighten up and then wait for the next bottom to develop before adding to positions."

His analysis is impressive, but this market doesn't read the newspapers. And bullish behavior like that of the past 11 days begets more bullish behavior.

Despite yesterday's closing rally, the overall chart pattern remains unchanged, with all of our most-watched internal indicators overbought and most of the sentiment indicators showing more complacency with the public now becoming very bullish.

So with the market's internals now at their weakest, the bulls are attempting an attack on the most formidable overhead of the entire bear market.

If Monday's huge rally seemed overdone, the market agreed with you yesterday. Profit-taking dominated the day, along with questions regarding the practicality of the Treasury's new plan to revive the financial system and the huge deficits dominated the news.

Stocks were down for most of the session but the market fell almost 100 points in the last half hour of trading, led by the banks and other financials.

At the close, the Dow was down 116 points to 7,660, the S&P 500 fell 17 points to 806 and the Nasdaq was off 39 points, closing at 1,516.

As I've said before, bear market rallies can be devastating to the short sellers because just as it looks like the market is turning lower, a piece of positive news occurs at a time when the market is most oversold and the shorts run for cover.

This usually drives the market higher with a dramatic explosion of buying, but just as the shorts exhaust their panic buying, the market turns down and eventually buries any new bulls as it dives to its former low.

Wednesday's announcement that the Fed would buy into the U.S. Treasury bond market was no surprise to most Fed watchers. In fact, the Fed has been talking about it for weeks.

But the big surprise was the size of the buybacks and the impact on future inflation.

So, with a newly revived concern about inflation, and five days of gains out of seven under their belts, traders decided it was time to cash in some chips.

But, technically, there is much more to the market's reaction to Wednesday's Fed move.