What Will It Take?

Futures are negative this morning as expected after earnings reports from AA and warnings from CVX and ERTS, among others, but the real question is how low can the market pullback without violating the uptrend?

For the Qs, the answer is pretty clear, 44.73 is the level that must hold. It is the high of the consolidation period from mid-November to December before the market broke out. It is also the 0.618 RT of the rise from wave e of the consolidation triangle on 12/17 at 43.76 to the first high of the breakout rally on 12/28 at 46.30. Everything since then for the Qs can be considered part of a still ongoing correction of that rally. It appeared last week that the Qs might just march straight on up to a top, but todays action may change that. Nevertheless, as long as support holds at 44.73, it would be difficult to say that the trend has changed. For the Dow the level is 10516.70.

I know many people are chomping at the bit to short this top. Looking back at my last attempt, which failed, I waited for a decline and then a retracement of that decline. I gave it a little room above the high and it was stopped out. So far, we haven't had a decline to indicate the top is in at any degree of trend since the breakout. So either we need to wait until the upside targets are hit, or we need to wait until there is clear evidence of a turn.