This could last until Monday

I wrote yesterday that since we failed to breakout of the pattern we were in we may get another test of Monday's highs. Upon reviewing lots of research last night I have an idea of how this might play out.

JPM announced higher than expected earnings this morning(no surprise) as the banks continue their streak of "nothing to see behind the curtain, the recession is over" 1Q earnings "surprises". The last two major financials to report are C (tomorrow) and BAC (Monday). I believe that Friday's close will mark the top. I believe that the banks earnings are a "buy the rumor, sell the news" type event.

I have seen data of extreme selling into strength over the last 1.5 weeks. The COT data two weeks ago marked a swing in institutional buying of calls to buying of puts and in large quantity. This data tells me that the big boys are unloading the positions they bought sub-700. They are using the same process that Livermore wrote about in his book over 60 years ago that I have discussed before.

Combining the data mentioned above with the overbought signals across many timeframes gives me the confidence to predict a top is imminent. I have been expecting it for over a week. I posted yesterday that the market seems to be artificially propped up. I believe that this will end when the last of the banks release earnings.

Here is a chart that I found detailing the current pattern.

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVJakpB_q6UpdP2QvD6DidM6QKuS3dCW8m20ab0Pinpb8Dsg8ujDjbklR6l2ji_Uxreu0-TPgVuIesYU5emSWfiCm0YnKGOqnXI7xkRhFjBp3GL5Xg0e2Xk5Q9Sb2QG5C3vOZw0ndOFRE/s1600-h/PROPHETMinor+1.png

It clearly shows that it should peak on Friday's close. I will be looking for higher prices through most of Friday and a last five minute before close rush to the exit. That is how it played out on Feb 13. It may do the same thing this Friday.

That dark line was a line of support that withstood 11 out of 12 tries at penetration. It was a line of support that connected the Nov. 19 low with all of the lows through Jan and Feb. When it finally gave way with a gap down open after MLK day we dropped 160 points in less than one month. We do not have the momentum to break this resistence until we have a decent retrace. Interestingly when we revisit this line after the expected correction it should be over 900. It will give us some trouble to break, but when we do we will accelerate upward. But that is months away.

I predict a gap lower on Monday or a flat to slightly up open and then a crap out. I am hoping that my new account will be funded by Friday's market close so I can get in on some low risk high reward short positions.