Use extreme caution in the coming days.

We are very close to an IT top. All of the writing is on the wall. From heavy distribution days to quickly closing opening gaps up to momentum indicators crossing over and finally an end target on the EW count. Use extreme caution in setting long positions today and into next week.

Since March 6 we've been throwing rocks on top of a house. The rockpile is so large now that we can hear creaking in the walls. It's only a matter of time.

From an EW perspective we have about another 10-30 points up from where we will open. The end is difficult to gauge in cirumstances such as we are in now. Since we are so top heavy we could roll over at anytime, but the chances for a blow off top exist also.

I plan on scaling out of my longs from yesterday as early as today if we get to the 930-935 area. We are set to open near 920 and I got in my shorts in the 900-905 area. What I am looking for in particular is a quick blast upward. This will be the wave 3 of this final move up. I think today's open will be the meat of wave 1. We will then correct sideways or downward before entering wave 3. A possible scaenario is that after today's gap up we drift down or sideways and ramp up near the highs at the close. Then we get a sizeable gap up Monday for the bulk of wave 3.

After this the wave could end at anytime. If I get signals of a blowoff top I will move all in in seconds. If not I will gladly pass up the last few points up to prepare for the next leg down.

I expect the next leg down to be shallow. A usual retrace in past recessions were deep, 50-100%. I don't expect this, although I will keep an open mind for it. It just seems that there is too much "hope and change" in the air for a deep and prolonged correction. I also believe that like a building volcano, by not relieving the upward pressure that has been building completely we set the stage for the terrifying P3 wave that the EW guys are predicting. I will blog about that at a later date since it is many months away.

So I am looking for a retrace in the 38.2% range. The move from 666 to 950? would retrace back to 842. A 50% retrace takes us back to 808. So this is my range 800-850. I look forward to enjoying the ride down and scaring the hell out of the newly rich bulls, at least temporarily.