I am thinking that we are nearing a possible market turning point. The rally in my view had high failure prone characteristics detailed in prior posts. I chose to sit this rally out. We have reached an overbought situation near market resistance points. Yesterday saw Doji's on the S&P500 and the Dow. These could be fortelling the top of the short-term trend. Really since the beginning of the year the intermediate-term market has been trendless but consistent with a major market top. The current rally has formed an expected right shoulder of a possible head and shoulders top. This pattern is not complete of course unless the market drops from near here.

We have some headroom prior to reaching resistance on many indices but I am paying attention to the Dojis and wondering if this is the place where the market will reach a cross roads. I choose the Dow Transports as the current leading index as it is the only index that has made a new market closing high. This index may have established a double top. I will watch this for further developments and may deploy some short taking probe positions if I detect market deterioration in the coming days.

If the indexes turn and run North my view changes quickly as this would imply a rejection of the contrarian view.