While most momentum oscillators are not showing much of a divergence with price with the recent new rally highs in the Qs and the Russell 2000, the traditional McClellan Oscillator is beginning to show a negative divergence. Note how the positive divergences at the bottom of the chart above led to significant rallies. The current negative diverence at the top of the chart should lead to a substantial pullback or even a retest of the February low.
Other factors are consistent with a short term top: % stocks above 40dma at 83%, absolute breadth index in topping range, equity only put/call ratio at low levels and overbought momentum oscillators. On the other hand, advance-decline lines have made new highs pointing to a continuation of the rally once this correction is over.
Today the markets managed to eke out a new wave (B) high by subdividing into an ending diagonal triangle for wave [c] of Y of (B). However, the pattern showed selling this afternoon. I expect the selling will accelerate tomorrow. Gold has already rolled over into wave Y of a double zizzag correction that looks to bottom in early May. Oil had an overthrow of a ending diagonal triangle today and will probably be correcting over the next 2 to 3 weeks with the stock market.
A selloff is imminent if not already underway, but caution is advised on the short side since recent new highs put a damper on downside potential. Some short term short positions may be worthwhile, but overall this selloff should be viewed as a setup for a great long opportunity.