FIRST LET'S LOOK AT THE S&P 500 INDEX
This has been a very frustrating month in this market for me. On June 13th I forecast a high on either the 19th or 27th and then discounted that probability since I thought it needed a lower high to be significant and that become unlikely the beginning of this month. Now there is a False Break pattern for top on the 19th. But always keep in mind we cannot look for a reversal in trend without first seeing a lower or secondary high in place. There were lots of daily extremes hit today, as new 52 week lows, breadth and upside/down volume which can indicate a low. Those extreme readings are usually valid for a low if the index is moving down when they occur. Coming directly after a high and a false break pattern puts a lot of doubt as to their validity in this circumstance. I think the index needs to go down and break something obvious like the June lows to set up a strong rally. And from that point we can look for a secondary or lower high. If there is follow through to the downside then touching the February high is likely.
NOW LET'S LOOK AT THE T-BOND DAILY CHART
T-bonds are now at that critical point within their chart. Weakness from this pattern of trending could indicate a completion of a counter trend rally and a resumption of the downtrend. There is no evidence of that occurring yet, but this circumstance does represent a probability for the resumption of the down trend. If that is going to occur it needs to start to move down within two week and also needs to show a rally of two or three days that fails to indicate trending down.
LASTLY LET'S LOOK AT THE US DOLLAR INDEX
Back on June 20th on Power Lunch I said to keep an eye on US Dollar as the current pattern would resolve itself with a fast move. That has occurred as the index is showing a fast trend down. This current pattern of trending that is showing a big "space" between this current pattern and the previous low can indicate that a capitulation or panic move is now in progress. If that is the case this move down could accelerate within the next few days, even faster than this current fast move down and capitulate or panic with the next week.
US rates aren't going to spike up and the Dollar spike down at the same time, so if both of these are going to occur I would expect T-bonds to distribute for another week or two if they are going to move down.