SPY daily RSI levels are now at 69.48 (70 is officially topping) per stockcharts.com. MACD is 1.628, which is just slightly under the previous market tops that we have seen in the past 2 years. Bullish percentage for SPX and NDX is at 6 month highs. Oscillators are nearly all maxed out and showing divergences from prices. Lastly, we are approaching the top of the bearish wedge that we have been watching, with the 20 week EMA pulling as hard as it can not to pass through the bottom of the wedge. On the VIX, we are at unsustainable low numbers at 12.5, with a 50% VIX drop just during the month of January. Now to be fair, pricing will have to fall simultaneously with the 20 week EMA through the trendlines to begin any expected capitulation in the bull market. However, keep in mind a price drop past 144 would do exactly that. If it was not for the trendlines which look like they cannot contain price much longer on either the SPY or VIX, I would tell you that we just experienced the head in a head and shoulders pattern. I would look for a coming drop to 136 again, followed by a rise to the low 147's, then a large crash to the mid 110's. But I am torn on this. We may see a rapid drop without the right shoulder. At any rate, we will be playing bear set-ups at this point. The market may peak slightly over the top trendline creating a headfake. Keep an eye on market action. The market should not have more than 1-2% left to rise. I would not chase any bull moves right now. The sentiment is way too bullish and many traders will get caught trying to capture the top movements.

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