Flat Top...

Another day of selling at the top has kept this rally from moving another leg up. On the daily chart we continue the migration to the right and remain in over-bought territory.



RSI is flat along with price action, but still over-bought. However, it can continue in this area for several more sessions. The stochs are also suggesting an over-bought condition with only marginal room for an up session. Again, the stochs are not absolute in their oscillaitons, meaning we can remain over-bought for some time.

I labeled three levels of support that I hope to see come in to play in the next several weeks. The top at roughly 1075, a left shoulder at roughly 1040 and a neckline (although it should be slanted, my bad..) at around 980. In an ideal world, we would flatten out the head just a bit more and head down to the neckline. My bet it that a large number of people will cover as that was the point where many of us thought the correction was under way. This covering will give us the right shoulder - which will fail because we are just way over priced here! (Hey, we are all speculators!).

Regardless of what happens, one thing is clear short term, we continue to hit a ceiling in around the 1073 area. We have some serious selling at this level and the result is a flat top that will either serve as a base for our next expansion or the mark of a local top.



Looking at the 1 minute chart for the last 3 days, you can see that several attempts at 1073 are just getting rejected. At the same time, we see support developing at 1071. This is a remarkably narrow trading range. Note the small 5 wave EWT rally that developed at around 11:30am. I have a fib grid drawn from the low (1068.9) to the high (1073.87). See the gap that formed in the middle of wave three? That again setup my short ES trades this afternoon. The confluence of the continuation gap, the 50% retracement level, and yesterdays high have created a nice price gravity band that, when combined with the selling at 1073, has kept this rally in check. The only other important fact to note is that the opening gap did not fill today - and chances still favor price action returning to fill the gap before moving too far ahead.

Perhaps the seller at 1073, the over-bought conditions, the un-filled gap at 1066, and the sheer ridiculous nature of the this entire rally will be enough to get a heathy correction started!

A break above 1073 and then 1075 could signal a new leg to the 1083 level. A break down below 1068 could lead to a test of 1064-2 and full retrace to 1057.

Good luck out there.