"Trouble Ahead, Trouble Behind"

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No great surprise here that the patient saw another piece of the puzzle unfold with the Russell 2000 down the most percentagewise. After all, I have written about the unusual volume on new highs every day since it occurred exactly a week ago.

Moreover, we have noted that the high tick from last Tuesday’s spectacular run remains the high. Last 5 trading days, IWM stayed within the range of 03/04 until this Tuesday, when it broke the lows and closed on a pivotal point-118.

Therefore, safe to say that under 118 expect more correction. I wouldn’t rule out 114 area next stop.

One positive sign is the S&P 500. With the small caps decline, it remained above the fast moving average and Monday’s low. Same with DIA. NASDAQ held Monday’s low but closed beneath the fast moving average.

Here is a repeat of the 4 possible scenarios one more time, only now with some slight modifications:

1) The blow off top pattern is still playing out

2) The market is digesting the recent rally through time rather than price

3) The market is digesting while it works off overbought conditions, and pretty much will continue to be range bound for a while longer

4) The market is not merely digesting, but fueling for a blast off from last Tuesday’s high with much higher levels to come-looking a bit less likely now

S&P 500 (SPY) Although under the average daily volume, still a distribution day in that better volume than Monday’s session on a red day.

Russell 2000 (IWM) Held 118. Eyes here

Dow (DIA) Tuesday’s low not the point to defend if bulls have a chance here

Nasdaq (QQQ) Looking toppy now too

XLF (Financials) 22.00 could easily be the place this stops declining

SMH (Semiconductors) I will love this group for a long time but not enough to stay long if everything else disintegrates

IYT (Transportation) Inside day but the shooting stars are beginning to show more of a top than launch pad

IBB (Biotechnology) Vulnerable to the 50 DMA

XRT (Retail) Vote for best place to go if the market holds up-still see new highs possible

IYR (Real Estate) Closed green-another place to look over Tuesday’s highs

GLD All of a sudden, looking exciting-watch this over130.60

USO (US Oil Fund) Touched down on the 200 DMA-important area

XOP (Oil and Gas Exploration) Drop to the 50 DMA

TBT (Ultrashort Lehman 20+ Year Treasuries) TLT Confirmed a phase change to bullish Monday and now we see why