S&P Update - Signs of Trend Change

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The stock indexes are at a make or break point right now in my mind. They have had the largest fastest decline since the March 09 lows. And now they have rallied back and are consolidating under the 50 day MA. The rally has also been slower than the decline.

So as a brief summary here are some signs of a larger trend change:

1) a decline that is larger and faster than any of several counter trend moves in the prior trend

2) oscillators overbought at lower highs than the last overbought signals

3) the rally attempt has consumed more time than the decline, but has not retraced all of the decline (the rally attempt was weaker)

Also see the notes on the chart for support and resistance, etc. Again, if the Feb lows are taken out, then things could drop fast for a little while to next support near 950 on the S&P. Also, remember that a 40 week cycle low is due in the March-early April time frame.


Now as far as intermarket relations go, I have a suspicion that things may decouple somewhat in the near future. A major issue is that the Fed is trapped in what it can do. On a fundamental level their strategy really is dependent on continuing to create new debt to buy a little more time to cover up insolvency. But the recent bond auctions are very weak - bond buyers know the US financial condition. So the Fed seems to have taken the first step in raising rates to entice bond buyers. And the trip down the rabbit hole begins. You can't tweak one area without it showing up in another.

So we'll see how this unfolds, but a few of my expectations are:

-US dollar index will consolidate or decline for a few weeks before resuming a larger uptrend
-oil and gold will largely trade with stocks (positive correlation)
-bonds prices are on the brink of a major decline (and may go through a large decline at the same time stocks decline)
-select few commodities may track the US dollar (positive correlation) because it seems that borrowed dollars (carry trade) were used to short those commodities already in major bear markets; those commodities had huge bear markets and may have much short-covering ahead