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.

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