05.02.2011 Update .. Pullback time

Looks like a pullback is upon us. Pay attention to the strength of the selling for tips on where we go after this. If the rally from March 2009 is over (which I am not advocating, but must consider as a possibility) it will show up in very impulsive moves (Fast, hard, high volume) and signal distribution (large institutions selling to mom and pop buy the dippers).

First stop seems to be around 1348 or so, but I don't think that would be the bottom of this pullback, but it could be.

I've done some simple Elliot Wave labeling for a potential forecast of how this pullback might play out in the form of an ABC structure. This is just a guesstimate of course. Short term elliot wave labeling is very difficult and often guessing.

The first chart is the S&P 500 30 minute / 20 days. I show how we lost the trendline, regained it this morning and then obviously lost it, so now should be in pullback mode. As mentioned over the weekend, the trendline was just too steep and proved to be too much to keep up with as the day went on. It has the simple EW count going forward for this pullback;



This second chart is the DOW Jones Transports. They are putting in a megaphone top and also lost an important trendline today. I'm curious to see what the DJT does here after putting in an intra-day all time high but only by a smidge and looking sort of double toppish on a 5 year chart. The Russel 2000 is in a similar situation. As mentioned before the Industrials are still the most bullish looking chart, but it also lost it's short term trendline, so it joins the S&P and DJT as having lost recent uptrend lines. Trannies chart;



EDIT: On second thought, it looks pretty clear we started 3 of A down for this pullback. So it should be a half decent sell off.

GL