While the breakdown hasn’t happened it appears as though it may , therefore, I’m letting you know my thoughts in advance.
As I write this post we have had no follow through Friday’s recent bounce. The bounce occurred off the trend line in the upper part of the long term trend channel. This suggests a test of the 1600 level again on the S & P 500. If you are a short term trader or just someone looking to take profits I would suggest tight stops.
There are a couple of things going on, first is the movement in the 10 Year Treasury Note, a move above the line depicted on the chart below could suggest that we will see higher interest rates and this could impact the stock market. Perhaps QE 4 may not last quite as long as expected?
Another chart is showing signs of coming to life and that is the VIX.
The VIX or the Chicago Board Options Exchange Market Volatility Index, is a popular measure of the implied volatility of the S & P 500 index. The VIX has been called the fear index or a gauge as to how much fear is in the markets, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.
These three technical views tend to reinforce my thoughts of a correction within the 4 year trend channel, and it could get kind of rough. With the markets being so extended rational thought is useful……..