Thursday April 28th, 2011 Cooked bears with bear sauce

Today traded as expected. Higher.

I'm not going to get into elliot wave analysis in this post, but I do believe we are in a wave 3 of the final cycle wave 5 of this rally. Cycle wave 5 would be = to cycle wave 1 around 1367. But since I believe we are only in wave 3 of cycle 5, obviously I believe we are going higher than that.

Moving on to other issues/factors, I widened my view and looked at some 3 year charts of the Trannies, Russel and S&P, I think i've identified some very very near term resistance in the trannies and Russel and potentially where the S&P is heading.

Points;

1) The DOW Jones Transports made a new all time closing high today. It is within 40 points of an all time intra-day high. Once DJT has all time highs both intra-day and closing, we will have a long term DOW Theory bearish divergence until and unless the DOW makes it to 14600.

Long term though, it kinda looks double topish. We'll have to see what happens there next, to kill the double top look, DJT will need to really launch up a couple hundred points.

DJT Chart;



2) The Russel 2000 is in a similar situation. It made a new all time high today, but only by 7 points. So on a 3 year chart. It kinda has a double topish feel to it. IWM (The russel ETF) actually flash smashed straight up for 10-20% today. Those types of things are becoming more common. Unstable flash moves like that in large ETF's like IWM for such large percentages just can't be good.

IWM chart; (I didn't mark it, but that crazy line today straight up was the flash move)



3) The S&P looks like it's in a big wedge and rising slowly to what I think is likely to be resistance and will time out well with the potential EW count. I do think we are getting close to a short term top here, but only for a 3-4% move back down to the bottom of the wedge. That will be the correction for wave 4 of cycle 5. Then one more surge up to my target area and line of resistence in the following chart. Somewhere in the low 1400's.

S&P Chart;



I'm curious to see if the Trannies and Russel find big resistance here and sort of grind to a halt while the S&P finishes it's patter along with the DOW (which is the most bullish looking).

With QE2 expected to end in June and "sell in may and stay away" coming, I expect the bulk of these moves to come over the next month and potentially finish just as Ben is winding down QE2.

If the trannies and IWM break out and really launch higher as the S&P and DOW finish patterns, we will have to re-evaluate their charts and even potentially think about everything in this market heading to all time highs. The bubble to end all bubbles.

I think there's room to keep rallying tomorrow, but a short term pullback is near.

As always, keep an eye out for impulse selling and volume that would signal distribution. Until we see that, the robots will remain on buy.