We have finally seen signs that the market, if not rolling over, is at least stopping, but before the bears start salivating, it is worth noting that today accomplished one thing; it took RSI out of overbought territory. We may be seeing 3 different scenarios here: a very nominal pullback to the neighborhood of 1330; a more sever one to about 1300; or a genuine correction down to the 200dma. The lack of distribution days makes the first seem most likely.
The third scenatio, a correction to the 200dma, looks possible, although not very probable, on the weekly chart, because a 50% retracement of the move off the November low would put us just about on the 40 week average on the weekly chart. While that is probably a case of seriously toruring the charts, it is a possibility we have hit at least a short term top. Stochastics and MACD histogram bear that out, at least to a degree.
I can't really say the same about the Nasdaq. Stochastics are very high bit not yet reversing, and MACD histogram is still rising. A 50% retracement will bring it only down to the 10 week average. The bears have nothing to go on here.
The Dow industrial is the index most obviously running into resistance, and the one that most closely suggests the third scenario.
The transports really don't fit, but I didn't expect them to. They do appear to be awfully weak, and weakness before has lead to market corrections. This time, however, the Nasdaq appears to be stronger than the transports are weak, so that may not hold this time..
The Russell 2000 looks likle it might have hit a top , but whether it actually has or not, flip a coin. However, a 50% retracement brings it down to the 40 week line, making it a possibility, but I would say at this point not that probably. Let's worry about the 10 week line first.
When it takes 6 weeks to get the first down week of the year, there is a tendency to want to call a top and, if not go hort, at least wait for another buying opportunity. We can only wait to see iof we get one here, or if it is another false alarm.
I will have the new highs update shortly.
