Like yesterday, today I don't have much to add to the previous updates.
I am strongly convinced that the risk of a large pullback (multi-week) of the US equity market is very large.
The main reasons for my bearish stance are based upon a likely ending pattern that is in progress in the US indices and above all by the selling signals triggered by momentum and breadth indicators.
1354 SPX remains the # that must be smashed in order to officially unveil the overdue pullback, in the mean time as price is unfolding a very likely ending diagonal price can either reverse to the down side suddenly without "telling anyone" or to continue to creep higher provided price does not breaks the upper converging trend line resistance. Keep in mind though that when price is in the hands of the last "bag holder" price will "fall off a cliff" as when an ED is finished the first move is always fierce.
I also maintain the scenario that calls for not a major top instead, price should unfold a Flat or Triangle wave (4) pullback with a wide target range: 1325 - 1300; The T L support off the October 4 low and the 50 dsma will probably have the main focus once the correction is in progress.
The "better looking" ending diagonal is the one that in my opinion is being unfolded by the DOW:
It is obvious that if the ending pattern pan out then the risk is very large for a pending correction.
I have to tell you that this tedious EWP has been quite exasperating but I am convinced that patience will be rewarded.
In any moment ECB will unveil the # of LTRO which could produce volatility in every financial market (forex, equity, bonds & commodities).
Later in the afternoon we have Fed Chairman Ben Bernanke delivery the FOMC's semi-annual report to the House Financial Services Committee.
If the LTRO # does not upset the financial markets then I don't expect a falling market when Mr Bernanke speaks, therefore maybe end of month + first trading day of new month bullish bias could derail the awaited top into the end of this week.