Here is a great example of a C=A zigzag corrective made today on the DOW emini future contracts index. In theory, the next move should be a motive wave down.

I adjusted the lower line of the diagonal. Looks like the rally may have topped today but we can't say for sure until we see the market actually start moving down.

This rally is close to being finished and the $TICK chart is showing a negative divergence in relation to the SP500. This is a bearish sign.

From looking at the weekly chart of the SP500, the path of least resistance appears to be down.

VIX is pointing towards a change in the market. As shown on the chart, a significant downtrend in RSI since November has been broken. Also, a price channel VIX has been in has also been broken.

Here is a chart of the weekly SP500. Since Oct. 2007 the market has sold off when the SP500 hit the upper Bollinger Band line marked in green on the chart. Right now it is at 969. After a 40% pop off the bottom without any meaningful correction, how well will the SP500 fair on this test of the line?

The market had a huge up day on Monday. There may be more upside to the market as the week progresses but not without strong opposition from the bears. Here is a chart of the SP500 showing the levels of resistance the market will need to break in order to continue it's climb. Today's close was also at the 61.8% retracement from the most recent peak and 38.2% retracement from the peak in August 2008.

I'm hoping for a gap up tomorrow as an opportunity to enter a short position. Then again it could bolt straight down. Either way, the market is weakening and a nice downside move is approaching.

Anyone still left on the ladder? If not, then the next batch of fools will be getting ready to climb on. LOL This process may continue a time or two more until all the fools figure out the ladder is unstable and due to come crashing down.

This week may turn out to be just like the final scene in the old movie It's A Mad Mad World. In the scene, the fire truck ladder goes out of control because too many people climbed on at the top. It ends up spinning out of control and the people clinging onto the top of the ladder start flying off in all directions. They all climbed onto the ladder out of greed and end up losing everything as the suitcase opens up and all their money is scattered about.

The Nasdaq is already showing weakness and I expect the Dow and S&P500 to follow. This may be the week this rally finally tops.

If the market pushes higher following the stress test and tomorrow's employment report, I will be looking to fade the rally. Today's strong selling without the usual end of day surge indicates the bull run is almost complete.

The market has now morphed into a market which never corrects. With that being said there is still a possibility of these rising wedge patterns slowing the markets down. Generally, these wedge patterns have a high success rate but given market conditions there is a good chance it will bust right over the resistance line.

Aaahhhh! April is finally over. Thursday, we saw a possible change in momentum. The morning pop quickly lost it's energy and the bulls all but threw in the towel. This vastly overbought market is sooooo overdue for a correction it isn't even funny. The SP500 is up 33% from the low without any real correction. That should soon change. Look for some heavy selling to get started maybe today but certainly early next week. The buy the dip buyers are going to be run out of town. Good Luck!

Whew, I'll be glad to see April end. Will the old saying "Sell in May and go away" hold true? The S&P500 has bumped back above the 90% mark of stocks over their 50 day moving average. Yet, the insane market continues higher. This is rare even in a bull market. The punch drunk bulls are determined to hold this market up. Everyone knows nothing goes up forever and when the market turns several bulls will get a reality check.

Until then, tomorrow looks like it will probably be another flat dull day with some upside movement potential. If bulls do intend to sell in May a few of them might try to get out early causing a possible reversal late in the day. Then again, a crushing claims number may cause a few bulls to hit the exits early.

The Dow, SP500 and Nasdaq are all showing a rounded top forming on the 60 minute charts. The Nasdaq seems to be lagging some and may still need to move a little higher before the curve rolls over.

I think the top may have been put in a little over a week ago at 875. The last of the bulls are still making their way into their doomed positions and the market slowly but surely is inching it's way down. Could we get a huge down day soon? Maybe so, but don't be surprised if this slow sideways progress continues. The drop will probably happen when even the bears least expect it.

On Friday, the SP500 broke out of the diamond pattern it has been in. Unless we make a new high to confirm this breakout I will continue to have my doubts about this latest push up in the market.

This wedge says it all. After an amazing run up AAPL is running out of room in it's pattern. The least amount of risk is on the short side at this point.

Ka-boom!! Did you see that drop into close?? Awesome, that 875 top looks like it will be solid for now and if the bulls aren't scared they soon will be. For tomorrow, there could be a upward move at the start but it should fizzle out. The direction has finally changed toward the south side.

On Tuesday, SRS printed a very bearish engulfing candlestick. It may move lower and test the lower trend line of the wedge. That's what looking at the candlesticks would indicate; however, I am favoring this being more of a head fake and the final push upward in the market on Tuesday as being the bulls simply refusing to roll over. Many bulls may believe the problems in the economy are solved and were just buying the dip while expecting new highs to soon come. The problem with this is there most likely isn't enough bulls in this pool to push it to new highs. The market really needs to correct first. With this rally being extended and extremely overbought, I believe SRS will grind it's way toward the top trend line instead of testing the lower line first.

Looking at a daily chart, it appears SRS is in a falling wedge pattern. A move back up to the top trend line of the wedge seems likely. Positive divergence looks like it will form on the MACD.

The $BKX moved up higher past resistance so it's pattern is a rising wedge up out of a rising wedge. It is riding up a steep slope of it's lower wedge trend line. It won't take much of a downward swing to break it out of this wedge pattern. Negative divergence is also showing up on RSI indicating the weakness of the trend.

If Friday has a bounce up to the resistance line on $BKX and reverses then a double top pattern will be in play. This pattern will need confirmation by falling below the swing low between the two peaks. If this happens then the measured move down would give a target of 28.5-29.0 for the $BKX.

Her voice can be heard all down Wall Street. The bears have gathered around and there remains one question left to be answered. Will the bears stand by and remain idle or will their claws come out and rip into this fat pig once she hits her high note? Stay tuned.

All three of the major indices are wedging up and close to their apex. This is a very reliable pattern. Although lately it seems the market only moves up it will not last forever. By the end of the week this rally should fizzle out for good.

All the indices are wedging up and showing weakness as they move toward breaking out below the lower trend lines. Negative divergence has formed on RSI. With the percent of stock over the 50 day moving average, the odds are greater for a move down rather than for the trend to continue.

Monday AAPL put in an interesting doji candlestick. RSI is showing to be overbought on the daily chart and volume has taken a serious dive over the past few trading days. It is now over it's 200 day moving average after moving up over 40% without any meaningful correction. I am anticipating the volume to pickup if some selling gets underway.

Since WFC released it's earnings surprise last week, the financial sector as led the market's rally into the clouds in anticipation of more surprise earnings by other banks. Today, GS steamed higher but dropped in after hours trading after it's earnings release. It's earnings also beat estimates but everyone has already bought it. Expect profit taking to occur in banks if GS leads in the selling.

It's been a long extended April fools day lasting now until April 9. The market now has 86% of the SP500 above their 50 day moving average. This is a four year high for this indicator. The banking index is showing a bearish rising wedge pattern which can also be seen on the three major indices. The odds of this rally continuing are dropping fast but bulls seem to keep on buying anyway. When the reversal occurs many of these bulls are going to be caught off guard and strong selling will follow. Watch the selling volume for clues in spotting this top.

It is becoming more clear we are finally in a correction phase in the market. The ascending triangle on the $BKX broke down on Tuesday showing a weakening in the financial sector. My downside target range is 735-750 on the SP500.

One of my favorite indicators is the $SPXA50R. When stocks get either too overbought or oversold then a change in the market's direction is not too far behind. Currently, nearly 80% of the SP500 is above their 50 day moving average. Yes, it can still move higher but this is a good indication of there being a high level of risk in entering a long position in the market at this time. I am thinking at some point this week the market's direction should change. Accumulating a position on the short side has a much better risk/reward ratio to it. Good luck trading this week.

Thursday turned out to be a gap with no crap. Unless the market can push to a higher high above 846 tomorrow I think the A leg of an ABC correction pattern will begin. The SP500 % of stocks above the 50 day moving average is now at 78. The market will eventually move higher but it needs to shake off some of the bullishness first.

Tomorrow is looking like it will most likely open higher but I will be looking to fade this rally. Since the SP500 low of 666.79 we have yet to have a significant correction. Obviously a correction is due. If this is part of an ABC correction we still need to have a C leg. This push up can't get past 832 without invalidating it as being a correction. A .618 retrace of the rally from 666 to 832 would land close to 730 on the SP500 which is where the C leg should take us close to. Good luck trading.

I am feeling good now that my taxes are done. Reconciling hundreds of trades is always a pain....but not this year. I found a nice software that can take the nightmare out of making sure all the trades are correctly accounted for and wash sales calculated. It's called Tradelog. I highly recommend it. Now that I finished my taxes I can get back to focusing on the market. Today (Tuesday) ended terribly and the futures are in deep red tonight. Tomorrow will most likely be another down day. Happy trading!!

I'm almost afraid to say it as this market continues to surprise anybody calling a top to it, but the action over the past two days seems to indicate a pullback is underway. As I've said earlier, negative divergence can be found on several charts including the major indices. The number of stocks on the SP500 above the 50 day moving average looks like it peaked at 74% on Thursday. This indicates a very high level of bullishness. When the market moves to an extreme level such as this it will begin to run out of aggressive buyers which are needed to continue pushing the market higher. The aggressiveness shifts over to the sellers which causes the market to decline. We should see at least at 38% pullback to about 770 on the SP500 from the peak in this rally. It could fall to the 50% level but since there appears to be a significant change in the mood of the market there may not be enough fear to get us to that level.

This rally is proving to be a difficult one to call the top on. At this point more upside is possible but it is too risky to go long and get caught by the rally finally putting in a top. All I can say is a top is very close. Since this is quarter end, big money fund managers may be pushing this rally higher and preventing it from topping in order to "window dress" their quarterly statements. They may be selling come April. A few more days of this market acting crazy may be in order.

Yesterday, I discussed AAPL's rally nearing an end and today's price action is supporting that theory. Negative divergence is also showing up on many other 60 minute charts I've looked at including the SP500, DOW and Nasdaq. Since the last time the market fooled me on my topping call I must say it can still go higher but I have a good feeling this time it has run out of steam. The DOW seems to have hit a wall at the 50% Fibonacci retracement of the January high. I'm looking to see if it finds support near the 38% level. Take a look at my Stockchart list and please remember to vote at the bottom.

AAPL has been on a great run since finding support in the low 80's. It is nearing the top of this expanding wedge pattern that it is in. I am now watching for a possible shorting opportunity as this rally become extended and RSI is becoming overbought on both the 60 minute and daily charts. A break in the uptrend line will show a weakening in the trend. It can still move higher but I think the upper trend line of the wedge will be difficult to break without a pullback happening first.

On my Stockcharts list, I've mentioned the possible formation of an inverted head & shoulder pattern possibly developing on the SP500. As noted on the chart, if this pattern holds true then the right shoulder should form if support holds at around 750. The 38% fibonacci retracement level is at about 751 so there is a good possibility for this to occur. Of course, head & shoulder patterns need confirmation to be valid which means the SP500 would need to rally past the neckline of the pattern after the shoulder has formed.

Okay, today was an exciting day for the bulls. Congratulations if you were in on today's monster reversal up after being negative most of the day. Now the question is where are we headed next. We are a long ways away from the SP500 666 low without any meaningful pullback. Very impressive indeed. The $CPC is still at incredibly low levels. Anybody still holding long from below 700 will be quick to take profit and bulls looking to buy have to be nervous about doing so without a pullback to support happening first. With that being said, the excited retail bulls may still be rushing in to buy even now and push us higher. We also have options expiration approaching in a couple of days which makes the call more difficult to make. It seems the market makers would want to push the market down some to spoil the call buyers fun. I'm thinking tomorrow may end up being a sell off day possibly extending into Friday but you never want to fight the tape when momentum is so high. Day trading for the rest of the week may be the safest way to play it by catching short bursts of momentum rather than holding a position overnight.

Today was a horrible day for short sellers. Once again the obvious thing didn't happen. The market loves to prove everyone wrong. I'm now in 100% cash and waiting for the market to give a signal regarding it's direction. The market is due for a pullback as it pushes into an overbought condition. It's just a matter of time before it's direction changes.

All three of the major indices reversed off of the area around the 50% retracement level. Look for the sell off to continue through the rest of the week with a possible up day coming this Friday with options expiration. A break below 740 on the SP500 I think would be solid evidence of a new down trend beginning. As the selling continues watch for positive divergence to develop on the 15 and 60 minute charts to serve warning of the approaching bottom.

GE had a great week jumping from a low of under $6 to bumping it's head at $10. It now has negative divergence on it's 60 min. RSI and is at the top of the downward trend line. If it opens up tomorrow I think it will be a chance to fade the open and play it from the short side. If it is able to break to a new rally high then that would be a signal to get the heck out of the short. I think the odds are greater of it having a pull back.

Next week will be important in determining the future direction in the market. I am currently leaning toward the market selling off but will be quick to close my short position if the market decides to continue the rally. The market had an incredibly bullish week and I expect some profit taking. Whether that happens Monday can be debated. Tomorrow I will post what stock I believe to be the best short for next week.

The $CPC has continued to move into an extremely low range. This shows a high amount of interest in call options indicating bullishness. When bullishness becomes extreme a correction will take place.

The market has been on fire and I'm having one of my best weeks ever. FAS has been extremely good to me this week. I even caught a gain on FAZ while FAS pulled back some. In the pre-market this morning I unloaded FAZ and bought FAS. It turned out to be the right decision. At the end of the day I exited all of my FAS and bought a small amount of FAZ again. I think this rally is getting close to being over however another push higher would not be surprising. Actually, I wouldn't mind adding more FAZ at a lower price. This rally could continue some on Friday but it is too dangerous to be adding long positions at this stage. The trap door can open at any moment now.

Finding the top in a rally is the same as finding a bottom when the market sells off - look for divergence. Negative divergence should start showing up in the indicators of intra-day charts and start spreading into longer time frames. When you see this happening it is time to tighten your stops on long trades and to start opening small positions in short trades.

As of this morning, the SP500 15 minute chart is showing negative divergence in the MACD indicator. Also, RSI is approaching an overbought condition on the 60 minute chart. It's time to get cautious if you have any long positions.

When the market moves down as it has been doing the key for finding the bottom is watching for the development of positive divergence. On Thursday, this divergence started appearing in the RSI and MACD indicators on the 15 minute charts and is now showing up on the 60 minute charts. This is signaling a change in the mood of the market. Although the market can continue to move down under these conditions, the balance of power between the bulls and bears is shifting toward the bulls. This doesn't suggest "the bottom" is in but another short term rally is on the horizon.

Now that the gap as been filled on the 60 minute chart I am expecting a move higher soon. It is currently consolidating at gap support. I think it should test the downtrend line of the descending triangle. If it is able to break this resistance a significant move higher can be expected. The best way to play this trade is to purchase AAPL close to gap support with a stop placed under this consolidation area. If it is unable to break the resistance line of the triangle that would be your sell signal. Since this is a bear market you must always use extra caution making long trades.