Stocks - topped or a fourth wave in progress
Stocks are potentially at a decision point between (1) an "immediate" end to the hope rally and (2) some meaningful delay of a "top" (say about 6 months) and possibly some meaningful upside potential.
Regarding the wave structure of the broad stock market, top choices are that
 The advance since the July low ended at the recent high earlier this week, meeting the expectation outlined in Hope Rally Ends Here (Jan 2011 attempt) (1/14/11).
If so, the wave structure of NDX suggests that the top is likely the end of the entire hope rally from the 2008/2009 lows. Completing the advance since the July low (Chart 1, red count) also completes a larger zigzag since the late 2008 low as well (Chart 2, red count). In addition, the long term count on NDX in Chart 2 shows that NDX has satisfied the minimum requirement of a top from a 10-year perspective by having achieved a recovery high.
The risk to this interpretation is threefold. First, wave [Y] of b has failed to reach equality with wave [W] of b (Chart 2). Second, the entire advance since the Jul'10 low could extend making the current top wave 1 of (C) of [Y]. Third, the current decline is a small degree 4th wave (see item  below).
Under this scenario, INDU has diverged from the rest of the pack. It potentially is in the final stretch of a rare expanding diagonal and should top soon (Chart 3 and Chart 4, blue count) .
 The pullback this week is a fourth wave - i.e. wave [iv] of 5 in SPX and INDU, but wave (iv) of [iii] of 3 in NDX (blue count in Chart 1, green counts in Chart 4 and Chart 5).
Here is a logical speculation under this scenario.
It is likely that minute wave [v] of minor wave 5 in SPX and INDU itself extends, offering room for NDX not only to finish [iii] of 3 but also [v] of 3 (Chart 1 and Chart 2, blue count).
In other words, some meaningful upside potential exists before minor wave 5 in SPX/INDU and minor wave 3 in NDX top together.
That top in SPX/INDU likely corresponds to wave A of the PINK count in Chart 2 of Hope Rally Ends Here (Jan 2011 attempt) (1/14/11). The subsequent pullback will likely be wave 4 in NDX and wave B in SPX/INDU, to be followed by a final advance as wave 5 in NDX and wave C in SPX/INDU.
Were it not for financials ...
Financials could play a key role in shaping the trajectory of the broader market. The numbers speak for themselves (Chart 6 and Chart 7). The risk of meaningfully validating the weakness implied by the sector's "severe" under-performance contrasts with the sector's potential to catch up with the rest of the market.
Standard & Poor's reports that financials, as the second largest sector, accounted for 16.24% of the SP500 index as of 1/21/2011.
Staples (10.43%), Tech (18.78%) and Discretionaries (10.50%) are either at all-time highs or practically there. These sectors represent 39.71% of the SP500 index.
Materials (3.57%), Energy (12.27%) , Industrials (11.07%), Health Care (10.91%) have retraced more than 2/3 of the 2007-2009 sell-off. These sectors represent 37.82% of the SP500 index.
The utilities sector (3.57%) has recovered half its loss.
Financials (16.24%) have lagged severely in both relative and absolute terms, regaining "only" about 40% of their prior loss. Were it not for financials, the SP500 index would be meaningfully higher and meaningfully closer to the prior peak.