03.14.2012 -- Blow off top?

Last time I posted, I went over how the market had to make a decision and the decision was made to move higher and we have now broken the rising wedge to the upside.

This, IMO, is a classic blow off top with a false breakout. This is what I wanted to see. Finally.

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Key Levels

Upside -- 1400, 1450?

Downside -- 1391, 1373, 1354, 1335, 1286, 1260

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SPX Daily;

So obviously the market feels really bullish right here, so lets go over some of the hidden things that are bearish.

1) First move is usually wrong. That is the underlying premise of our fake breakout higher and blow off top.

2) You can see in the chart that the RSI and MACD is declining while the S&P is putting in a powerful move north. That is a bearish divergence.

3) Yesterday the Transports tried to make a move north and got back over the 50DMA.. that reversed heavily today and is back underneath the trannies greatly underperformed today. This is still a DOW theory non-confirmation, which is bearish.

4) Sentiment is getting extremely bullish with things like CNBC having an "analyst" on this morning that when asked, essentially said he was buying pretty much anything and everything.

5) The financials were trying to stage a breakout yesterday. Today the XLF closed flat.. but the internals were quite mixed.. with some stocks like Citi and Goldman Suchs taking a big hit and others like BAC rallying hard. The XLF was very bi-polar today.

I know it doesn't seem like it, but something ugly is about to come out of the woodwork here soon. It could be that housing prices start tanking again with rates looking like they've put in a long term bottom. I still believe there are simply more houses than people to occupy them and it will remain a fundamental problem for the housing market. It could also be when the CDS trigger on Greek debt is pulled. It could be a large country like Spain or Italy that suddenly starts spinning the toilet bowl... but it will be something and soon.

GL

CJ