The Dow Industrials are tracing out a very clear ascending broadening wedge pattern. The upper trendline will be at 10529.55 on Friday 11/20 and at this point, it seems likely that this level will be hit or an attempt will be made at it anyway. The latest rally has been accompanied by sharply declining volume and a multi-week negative divergence in the RSI that suggests that the rally is coming to an end soon.
The likely path of the correction would be down to the lower wedge trendline followed by a bounce into yearend and then another leg down to complete the correction in a head and shoulders top pattern.
This pattern sometimes leads to an overthrow of the upper trendline, but failure to reverse quickly after the overthrow would imply a more bullish outcome. It looks as though options expiration will keep the markets up until Friday.
If a correction does not follow, I will be exiting half index short positions and looking to buy breakouts of leading stocks for a continuation of the rally into yearend.
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