Be open to a possible exhaustion move....

With the Nasdaq hitting another rally high and the SPX lagging, we are setting up for a possible exhaustion move. This is the last ditch effort that expends the remaining energies of the bulls and triggers a massive reversal. We ended the day with a nice hammer bar on the daily chart. If we gap down tomorrow, then we may likely sell off from there as that would be confirmation of the bearish candle. However, we have to leave open the idea that the bulls are going to push for marginal new highs with the Fed FOMC meeting this week. We have been contracting significantly and the history has shown a tendency for a volatility explosion the week of the Fed FOMC meeting. Of course, you know my expectation is for a downside breakout, but it may come after a final push to the SPX 884 area. This is where c=a*1.382 (an exhaustion ratio) on this last zigzag and where z=y*.618, and where w=(y+z)*.618. Until we get a daily close below SPX 834, we have to keep this option on the table.