Joe Friday Just The Facts Ma’am- Crude is breaking down after the double top, which suggests in time it could test rising channel support at the $39 level at (3).
In the chart below, we look at the past 20 years for the S&P 500 and 5-Year US Treasury Yield. They tend to rise together, but when rates/yields roll over and support is breached, a deep stock market decline ensues. See support at (1) on both.
This chart looks at the Nasdaq Composite Index (IXIC) over the past 38-years. It has spent the majority inside of the past 25-years inside of rising channel (1). A potential tech wreck could start with a breakout from the shorter term rising channel (2)
Junk bonds and the S&P 500 are currently testing 9-year rising support currently. If both break below 9-year support, they would be suggesting that a long-term low in stocks is not in play.
The long-term trend for this index remains up for the Nasdaq composite index, as it faces one of its most important support tests in the past 9-years at (3). If dual support would not hold at (3), look for selling pressure to ramp up!
Divergence, 200 day moving and momentum are the three ingredients to watch today. Should momentum break below the 2018 trading range, price break its 7-year rising support and below the 200-MA, selling pressure could begin to parallel 2000 and 2007.
The U.S. Dollar/Gold ratio may be forming a “lower double top” just below falling channel resistance. And each of the prior highs has coincided with momentum peaks (top box of the chart). As you can see, momentum looks to have peaked once again… and may be rolling over.
The yield on the 10-year note is kissing the underside of 10-year resistance at (3). Further weakness in Crude could be suggesting that interest rates are near an important peak, where a decline in rates could start.
It may not end the same way, but it’s definitely worth noting the weakness in the housing sector. Especially the homebuilders (via the Dow Jones Home Construction Index).
