End of 2nd Qtr

Pull back Monday?

We have seen a MONSTER rally that has eaten my short position for lunch.  But, as a rule, I don't react to big moves on the day they happen.  The combination of a good "agreement" from Europe, the end of the quarter, and the end of the week were all positive influences on this market.  Yesterday I thought the technicals were already too high to sustain the rally.. I was wrong.  Here's the breakdown of today's numbers. The score that jumps off the screen is the RumWave score in red.  The 4 hr and Daily are high, but not unsustainable.  

The slow stochastic on the 4 hr chart (top) shows that the market has room to continue higher, but it would be reasonable to expect a slight pull back based on the red line being so high.  On the Daily chart (bottom) we see the first large candlestick higher.  We also see a bullish crossing point on the slow stochastic.  Both of those tell me there might be more room to run up.

All of these factors lead me to this conclusion:  it is reasonable to expect a pullback Monday, perhaps as large as half the gain today (around 130ish points).  At that point I will consider closing my short position.  The reason is that this same scenario played out at the end of 2011 when the Euro crisis was temporarily resolved.  The RumWave triggered a sell signal, had a sharp decline, then grinded higher for months.  I'm not saying that will happen, just that it is a possibility.  In that particular scenario, the best decision was to buy into the market, even though the RumWave was already pretty high.