The Dow Jones Industrial Average (and S&P 500) is forming the fifth wave within a five-wave up-move off the March 2009 low. According to Elliot Wave International, bullish sentiment has reached an extreme with roughly 92% of participants bullish on equities. Bearish MACD & RSI divergence is evident on hourly, daily & weekly charts, which indicates that there is only a small margin for error for stocks. I anticipate the formation of either a rising wedge or a blow-off top. In the event of a bullish exhaustion, a key Fibonacci level at 11250 could be tested (the 61.8% retracement of the entire bear market decline). Moreover, the VIX is exhibiting bullish MACD divergence, which hints of false-break of the 16 threshold and more importantly a pickup in volatility.
