The only thing that pays us in this market is price. That’s it. So what we try and do is use a handful of supplemental indicators to help us identify when a change in trend is about to occur. One of the more helpful tools we have to achieve this is momentum. We start to see momentum readings diverge from price, before price ultimately peaks in the coming days, weeks, or months; depending on the timeframe in question.

I personally choose a 14-period relative strength index (RSI) to gauge momentum across asset classes. You can read more about how I use RSI here. In this particular case, I want to focus on the obnoxious amount of bearish momentum divergences that we’re seeing in many of the most important indexes, sectors and stocks around the world. These “divergences” occur when prices make new highs, but momentum simultaneously makes a lower high. It’s a sign that a change in trend is approaching. Since we take a weight-of-the-evidence approach to markets, it’s not just that we’re seeing one or two of these sprinkled around. They’re showing up all over the place.

Here are just a few examples worth noting:

S&P500

Nasdaq Composite

Latin America

Emerging Markets

Freeport-Mcmoran

Utilities Sector

IBM

Chile (who led us from the start and a was big reason we got bullish stocks in late Jan)

Brazil

Semiconductors

Industrials

Apple

Become A Member of All Star Charts for further interpretation of this behavior, and more importantly, how we’re trying to profit from it. With Your 30-Day Risk-Free Trial, you gain access to the Trade Ideas Page, the Weekly Letter to Members, an Archive of all the Monthly Conference Calls, access to the Chartbook and Many Other Bonus Features.

SEE ALSO: Silver still looks good

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Valeant Pharmaceuticals (VRX) has fallen roughly 90% from its August 2015 highs, but is now potentially setting up for a counter-trend rally.

Structurally this stock remains in a strong downtrend, but is now testing long-term support near 25-27. Prices first tested this level in March and April of this year, rallied briefly, but are now slightly undercutting those lows as momentum attempts to put in a bullish divergence. If prices are above 27 on a weekly closing basis, that would confirm the bullish momentum divergence and failed breakdown.

The daily chart provides a closer look at the failed breakdown and bullish momentum divergence that’s already been confirmed from a tactical perspective. As long as prices are above the April 4th lows of 25.27 on a daily closing basis, the bias remains to the upside with a price target up toward the top of the range near 37.

With prices roughly 420% below their 200 day moving average, this failed breakdown has the potential to develop into a much larger move over the long-term if price action in the stock continues to improve.

The Bottom Line: There has been little reason to bottom-fish VRX throughout this dramatic 10-month decline, but the current weight of evidence suggests that the tactical bias has shifted to the upside. Bulls want to see this stock follow-through to the upside and confirm the structural failed breakdown with a weekly close above 27.

Tactically we only want to be long this name if it remains above the April lows of 25.27 on a daily closing basis. The average true range over the last 14 days is roughly $3.15, so if you’re going to trade this, be sure to factor in the high volatility of this name into your risk management plan.

As always, if you have any questions feel free to reach out and I’ll get back to you as soon as I can. @Brunicharting

***

JC here – This one reminds me a lot of Yahoo in early February when we wanted to buy it around $27 (see here: Buy Yahoo Feb 3rd). I’ve been watching $VRX closely over the past week and could not agree more with what Bruni is suggesting here. I particularly like the fact that there are bullish momentum divergences on both weekly and daily timeframes. That’s a great combination. The one thing I would add is that using some kind of options strategy here might not be the worst idea. Because of the added headline risk in this name, owning premium instead of  or in addition to the common stock helps define the risk. On the stock side, the line in the sand is extremely well-defined. Discipline if you’re wrong is key on this one. $VRX is NOT something to own if it is below the March lows.

Would you like regular updates to this chart? Click Here to become a Member of Allstarcharts today! You will also receive regular updates on when and how to profit from the U.S. Stock Market Indexes, Sectors and individual stocks.

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Stock are going up and to the right, according to the technical analysis team at HSBC.

The group, headed up by Murray Gunn, observed numerous key indicators it said pointed to a higher move for the S&P 500 over the next few weeks.

"The S&P 500 Industrials sector has given a bull signal with momentum turning higher on the back of a positive Cyclical Trend Indicator," Gunn wrote in a note to clients Monday.

"Added to the upside breakout in the FANGs highlighted in our publication of June 2, this is further evidence that a melt up in US stocks is becoming an increasing probability."

The thinking here is that both manufacturing stocks and consumer-related stocks such as the FANGs (Facebook, Amazon, Netflix, and Google by HSBC's definition) are looking strong using HSBC's preferred method, the Elliott Principle.

The principle posits that investors move between periods of bullish and bearish sentiment in a consistent pattern, and based on the current charts it appears that the S&P 500 is going into a period of bullish thinking. (Our full explanation of the Elliott Principle can be found here.)

So in Gunn's analysis, both industrials ...

... and the FANGs have strong bullish trends forming to support them.

Basically, the upshot here from HSBC is that stocks are going higher for the near term so get on board while you can.

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After rebounding by about 95% from its February lows, crude oil has plateaued.

And, notably, something similar has happened several times in the past, prompting analysts to wonder whether they could draw parallels.

In a recent note to clients, a Citi team led by Tom Fitzpatrick outlined three prior periods when oil prices plunged and then rebounded sharply:

1. 1986-87— when WTI crude plunged after a huge supply glut. At the time, Saudi Arabia pumped up production in order to maintain/gain market share.
2. 1996-99— when the Asian Financial Crisis slashed demand.
3. 2008-09— when the Global Financial Crisis decreased demand and led to a huge global economic slowdown.

"The most recent oil collapse has similarities to these three historical periods ... however, the important question now is which recovery will this be most like, if any?" the team wrote.

The analysts argue that the 2008-2009 slowdown can be crossed off the list immediately. However, they point out that there are some similarities between the other two and today.

The 1996-99 slowdown, for example, has some macro parallels with the current environment, including — but not limited to — the five- to six-year dollar strength, the Fed's tightening of monetary policy while the European Central Bank is easing, and a massive sell-off in local market currencies.

Meanwhile, looking strictly at the oil market dynamics, there are some overlaps with 1985-87, which was also driven by a huge supply glut.

Here's what the Citi team said (emphasis added):

Looking at it from that lens, it would not be surprising in our view that the dynamics we see in Oil in the coming months (and potentially years) is like that seen in the late 1980s. This is one in which the low for Oil prices is likely in, but we are unlikely to get back to close to the highs from before the collapse. In addition, we are likely to see deep corrections (though higher lows than the February low) while still seeing higher highs on price recoveries.

In any case, it is important to emphasize that none of these scenarios 100% predicts what will happen with oil today.

After all, technical analysis is more of an art than a science, and it is extremely difficult for investors and economists to forecast what will happen in the future — especially when so many variables are involved.

But still, it's interesting to point out that oil's recent behavior is not without precedent — and to wonder what that may indicate (if anything) about its trajectory.

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The man who accurately predicted four market crashes to the exact date each time has told Business Insider about three more dates to worry about.

Sandy Jadeja is a technical analyst and chief market strategist at Core Spreads.

Technical analysts look at charts to pinpoint patterns in various markets and asset classes. From that, they forecast which direction prices are likely to move.

They can't tell you the reasons why there will be a big market movement, only that there is going to be one.

He now warns that the following dates spell trouble for the Dow Jones in the US that could spread to other markets.

1. Between August 26 and August 30, 2016.

2. September 26, 2016.

3. October 20, 2016.

"We have interesting times ahead of us. We are dealing with issues on so many levels from economic uncertainty in the financial markets, including currencies and commodities as well as the rising house prices we have seen," said Jadeja in an interview.

"I believe that using the information we have and embracing the tools and technology we have access to right now that we could use these to our advantage to prepare and protect as well as prepare and prosper."

So what's his secret?

The spot-on track record

It is worth revisiting his track record.

In 2005, he said he warned 2,000 investors at a speaking event in Shanghai, China, a talk in New York at a Traders Expo, as well as banks and investment houses at a speaking event in Dubai about the property market crash — eight weeks before it happened.

More recently, on July 31, 2015, before flying to Singapore to speak at a conference of more than 5,000 people, Jadeja warned investors on CNBC that something big would happen on August 18, and to "be prepared to bank profits and stand aside." There was then a flash crash where the Dow Jones Index lost 2,198 points (-12.5%) in just four trading days.

After that successful prediction, Jadeja told CNBC on August 28, 2015, that "there would be a further decline commencing on September 14 or 17, 2015. Then, yet again, the Dow Jones fell 991 points (-5.8%) over eight trading days.

And then on October 1, 2015, and in November, he told CNBC again that, "January 4, 2016 would face a bearish mood and see the markets fall despite the bullish consensus on Wall Street." On that date, US markets and other global indexes fell sharply, where the Dow Jones shaved off 1955 points (-11.2%) over 11 trading days.

How he predicts what the markets are going to do

Technical analysts use historical charts to spot patterns in the markets. They cannot tell you what event will move the markets. They can only tell you when a shift is likely to happen.

And we are in for some big bumps on the road to 2018, Jadeja said.

"We are currently in a very dangerous time zone between 2011 until 2018. This is an 84-year cycle [called the 'Time Cycle'] and the previous cycle appeared during 1928 until 1934 where the Great Depression took place," he said.

Take a look at this chart:

Now take a look at the chart that mirrors that period:

“This exact same cycle is what we are in right now. And so I am worried that we could see a potential threat to our economy in the current 'Time Cycle' we are witnessing right now," said Jadeja.

“We have a situation. This lasts until 2018 for this particular cycle. And my worry is that we could see sudden sharp declines take place and tripping investors if they are not prepared," he said.

Jadeja is convinced that the sudden declines will take place on three dates — between August 26 and August 30, September 26, and October 20, 2016 — in this "time cycle."

But while it sounds bad, at least investors can take the market warnings on board and prepare themselves.

"We can use market data to help us forecast price targets and when we see price and time meet together there is a stronger than average potential for major turns in global markets," he said.

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Stocks are up. In fact, three days into the post-Brexit world, the Dow Jones is up nearly 200 points, and stocks around the world jumped on Tuesday.

This is encouraging news given the giant sell-off that occurred over the past two trading days with declines of over 600 points and 250 points, respectively, in the Dow.

While this would appear discouraging, according to Nautilus Investment Research, the drop may actually be setting the market up for a face-ripping rally upwards.

"Historical aftermaths, we generalize, are mixed to Bullish for the near-term but with the only sure bet continued volatility," said a note from Tom Leveroni at Nautilus.

"For some perspective, the two most comparable periods to the >9% loss for global stocks (MSCI World ex-US, MXWOU) are the 1987 crash and the October 2008 financial crisis. Take note that the SPX rallied the day following those two declines by an average of 10% [small sample warning]," the note said.

Yes, these are just two instances, and as we've said before, history may not be the best guide for future results, but in many cases it's the best we've got. Given that, the current trend indicates that stocks outside the US could see some serious gains. For the US, the traditional move is similarly upward-looking.

"Recent times the SPX fell > 5% in 2 days were also biased positively in the near-term if one could stomach the gut-wrenching volatility," the note said.

In fact, according to Leveroni, the S&P 500 has dropped more than 5% over a two-day period 29 times since 1996. Nineteen of those times stocks ended the following day higher, and 21 of those times stocks ended the month higher.

So, yes, it may look bad now, but history suggests that it could get a lot better soon — as long as you hold on tight.

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The S&P 500 hit an all-time high at Monday's opening, but that may not be the end of the good news.

According to Tom Leveroni at Nautilus Research, hitting an all-time multiyear high in particular means more good news is on the horizon. The market has broken its multiyear record 17 times, and each of those instances has been followed by prolonged growth.

"As shown below, the only thing more bullish than a new 1 year high is a new multi-year high (i.e. > 2 year high) — 16 of 17 occurrences since 1928 gained 3 months later (avg + 4.44%) and all 17 occurrences were higher one year later," Leveroni wrote in a note to clients on Monday.

In fact, after these 17 multiyear highs, the average return for the S&P 500 has been 8.54% over the next six months and a whopping 15.56% over the next year.

Just because we've hit a new high doesn't mean it's the top yet, in Leveroni's opinion. He was also impressed by the resiliency of the market in such an uncertain global atmosphere, which makes the latest record, as he called it, "The Mother of All Buy Signals."

"This new high breakout in US big cap stocks has defiantly bucked a dour global mood and, based on historical precedent, should be respected," he wrote. "We know of no other technical signal as robustly bullish for a longer-term horizon."

While past performance is not always indicative of future returns, 17 out of 17 isn't bad.

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After a post-Brexit misstep, the stock market has regained its footing and roared past all-time highs in the past week.

The strength has been broad-based, and it appears to Sheba Jafari, a technical analyst at Goldman Sachs, that this upward trend in markets could continue for a long time.

"If this is truly a 3rd wave from June, it should really move past 2,191 and eventually reach a 1.618 target at ~2,263," Jafari wrote in a note to clients Sunday.

Jafari, who calls the recent rally "textbook," is using a method of technical analysis that posits that market behavior is orderly and moves in "waves," thus it can be tracked as long as you can read the signals the market is telling you.

Based on these signals, Jafari believes that not only is there a short-term uptick of at least 100 points in the S&P based on Friday's closing price, but in the long run there is even more good news for stock investors.

"Narrowing in even further, the move since February is likely to be wave (5) in a sequence that starting in 2010," Jafari wrote. "As such, the minimum target for wave (5)/III is 2,172 (now effectively satisfied). An extended target goes out to 2,394-2,452."

So to clarify: In the short-term, Jafari is projecting a target of 2,263, and over a month the index should get as high as 2,452. To get to these points, however, there may be some pain. And to be clear, this is Jafari's and the technical-analysis team's view, not the Goldman Sachs house view.

"Would view 2,263 as an ideal place to start a 4th wave correction," Jafari wrote. "Pullbacks up to that point should be shallow and short-term (similar to price action earlier this year in March/April)."

There may be some stumbles on the way up, but evidently Jafari thinks the rally has a way to go.

SEE ALSO: The new all-time high for stocks is the 'mother of all buy signals'

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The man who accurately predicted four market crashes to the exact date recently told Business Insider about his calendar prediction for when oil prices would start to significantly slump again.

Sandy Jadeja is a technical analyst and chief market strategist at Core Spreads.

Technical analysts look at charts to pinpoint patterns in various markets and asset classes. From that they forecast which direction prices are likely to move.

They can't tell you why there will be a big market movement, only that there will be one.

He says there is a specific time period to watch out for.

"Interestingly if we take a look at the chart [below], we can clearly see the technical indicator on the lower portion of the chart showing a potential move to lower prices," Jadeja told Business Insider. "This is a well-known seasonal effect that many commodities tend to follow and can be utilised for profitable trading.

"By observing data patterns we also note that there is an 80% probability of lower prices from July 2, right through to August 18. These type of patterns can be very useful to short-term traders who are either looking to profit from short-term trading opportunities or the longer-term trends as shown on the chart."

So basically, Jadeja sees there being significant weakness for the next three weeks:

As detailed before in a previous article on Business Insider, Jadeja has significant success with predicting when markets will crash, bottom out, or rise again. He also has told us about key dates when equity markets will see a downturn. You can read about those predictions here.

But oil is a tricky one. Oil, which cost over $110 a barrel in June 2014, is now trading at about $45 a barrel. At one point this year, it was touching $20 a barrel. So considering oil's current level, it looks as if prices are in a recovery.

But Jadeja said there would be a period of further downside trading that could provide a good opportunity to short sellers — people who bet against the performance of a company or asset and profit when the company stock or assets fall.

In trying to time the market, however, Jadeja noted the standard disclaimer that "past performance does not guarantee future certainty."

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Here's the thing about stocks: They usually go up.

As a bet on the future profits of America's biggest businesses, and in turn a broad reflection of prospects for the US economy, the S&P 500 tends to go up over time just as the US economy tends to get bigger.

This doesn't mean, however, that progress for the stock market — or the economy — has always been smooth sailing.

In just the past 15 years the S&P 500 has seen two nasty bear markets, one following the bursting of the tech bubble and the other during the financial crisis. Over the past 18 months or so, the market has been stuck at a new high with a few rapid 10% declines and rebounds mixed in.

But even if you bought stocks only right before the 2000 and 2008 market tops — and then bought stocks again only when they got back to May 2015 highs — you'd still be making money.

The following chart, which comes to use from Raymond James analyst Andrew Adams, shows that $100,000 spent on the S&P 500 at each of these three most recent tops still nets investors an $80,000 gain (or 26.6%) over this period. And this doesn't include the roughly 2% dividend the index pays.

"For most people, it can be a tough psychological battle to buy when the market is making new all-time highs since no one wants to risk getting in right before a major market top," Adams writes.

"Yet, history has shown us that you don't have to time it perfectly to make money in stocks in the long run."

So the lesson here is that nothing helps out an investor in the stock market quite like time.

No one knows where stocks are going next week, next month, or next year. But if you're an investor with a long time horizon and a disciplined plan, it really doesn't matter.

The arc of US economic history bends toward progress, and while the stock market is a fickle reflection not just of American business value but also anxiety, panic, and the madness of the crowds, the market's broad trajectory is up and to the right.

Just give it time.

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Three patterns are setting up the stock market for a breakout rally, according to Jeffrey Saut, chief investment strategist at Raymond James.

In a note on Tuesday, Saut briefed clients on one historical trend and two observations from technical analysis that indicate the S&P 500 could reach a new record again.

In horse racing, a trifecta is a bet that nails the order of the first, second, and third finishers.

"Nobody can consistently 'time' the various markets," Saut cautioned.

"Yet if one 'listens' to the message of the markets, you can certainly decide if you want to be playing hard, or not so hard," he wrote. "We have been playing pretty hard since our model targeted the mid-February lows."

Here are the messages:

• An all-time high after a dry spell is usually good for stocks. In July, the S&P 500 clinched a fresh high for the first time since May 2015. Every other time that the index reached new highs at least 52 weeks after the old record, the average return in the following 12 months was 12.28%, Saut noted.
• The Coppock Curve, which measures how fast the S&P 500 is rising compared with 11 and 14 months ago, shows that it's a good time to buy. This is because the curve has moved from a negative to a positive position, meaning the S&P 500 is at a turning point on a longer-term basis.
• The Bollinger Bands have shrunk to one of the narrowest readings in decades. The bands are constructed two standard deviations from a 21-day moving average, up and down. Traders view a tightening of the bands as a sign that volatility is about to increase. In the six times they've narrowed since 1960, S&P 500 returns have been "significant" over the following year, Saut said.

The benchmark S&P 500 jumped to an all-time high on Monday together with the tech-heavy Nasdaq. It was one of several new highs the market reached in recent weeks.

But it's been a slow crawl higher in a very tight range. Monday marked the 26th straight day that the S&P 500 did not rally or fall by more than 1%.

"It is worth noting that, following tight trading ranges, like what has happened over the past few years, these 'quiet periods' have almost always been followed by significant rallies," Saut wrote.

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One of the biggest stories over the past few years has been the strong dollar.

But that may be about to change, according to the latest technical analysis from Nautilus Investment Research's Tom Leveroni and Shourui Tian.

"The US Dollar Index is poised to signal a major long-term trend change this week," they wrote in a note to clients.

Leveroni and Tian note that in 12 of the 14 times the US Dollar Index crossed below its two-year (100-week) moving average, the index fell three months later.

Notably, the index crossed below its 100-week moving average on Tuesday, according to data from Investing.com.

In the chart below, shared by the duo, the red circles show where the index dipped below the 100-week moving average.

According to data cited by Nautilus, after crossing the 100-week moving average, the index fell by an average of 3.29% over the next three months compared to the typical performance of -0.02% over all three-month periods. A drop of that magnitude would push the index down to 91.91 from its current 94.38.

Still, we must emphasize that the past does not predict the future. So the fact that this has happened 12 out of the past 14 times does not necessarily mean that it will happen this time, nor does it mean that it won't happen.

Either way, it's impossible to predict.

Rather, it's merely interesting to take a look at what happened when such a major threshold was crossed in the past.

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The man who accurately predicted four market crashes to the exact date has been proved correct on his fifth prediction.

Sandy Jadeja is a technical analyst and chief market strategist at Core Spreads.

Technical analysts look at charts to pinpoint patterns in various markets and asset classes. From that they forecast which direction prices are likely to move.

They can't tell you why there will be a big market movement — only that there will be one. His previous four predictions are explained in detail here.

He told Business Insider last month that there was an "80% probability of lower [oil] prices from July 2, right through to August 18."

"Interestingly if we take a look at the chart [below], we can clearly see the technical indicator on the lower portion of the chart showing a potential move to lower prices,"Jadeja told Business Insider at the time. "This is a well-known seasonal effect that many commodities tend to follow and can be utilised for profitable trading."

This was the chart he provided at the time. As you can tell, there is "V" pattern for the period, with a significant slide in prices before a slight recovery toward the end:

During this period, oil prices did indeed follow this pattern. First of all, look at how oil prices behaved during the beginning half of the time period:

Overall, from July 2 to August 18, here is the oil price movement that mirrors Jadeja's chart:

Oil has been a tricky market to predict. Oil, which cost over $110 a barrel in June 2014, is now trading at about $47 a barrel. At one point this year it was touching $20 a barrel.

The oil market was hailed as returning to the bull market after hovering above $50 a barrel. Prices fell again, however, and couldn't keep above $50 a barrel because of chronic oversupply in the market.

There are several key dates that we need to watch out for, Jadeja said in June this year. Sharp movements in the US stock market could spread to other areas on the dates listed below, Jadeja said.

1. Between August 26 and August 30, 2016.

2. September 26, 2016.

3. October 20, 2016.

"We have interesting times ahead of us," he told Business Insider in June. "We are dealing with issues on so many levels from economic uncertainty in the financial markets, including currencies and commodities as well as the rising house prices we have seen.

"I believe that using the information we have and embracing the tools and technology we have access to right now that we could use these to our advantage to prepare and protect as well as prepare and prosper."

In trying to time the market, however, Jadeja noted the standard disclaimer that "past performance does not guarantee future certainty."

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Treasurys have been under pressure of late. After putting in a low of 1.36% on July 8, the benchmark 10-year yield has rallied more than 20 basis points to its current 1.58% as solid economic data and Janet Yellen's hawkish speech at Jackson Hole have traders pricing in the possibility of the next Federal Reserve interest-rate hike coming as soon as the Federal Open Market Committee's September meeting.

In a note sent out to clients on Wednesday, UBS' Technicals team of Michael Riesner and Marc Müller warn, "US Bonds Are Sitting On the Edge." The two suggest that 1.63% is the key level to watch for on the 10-year yield and that a breakout above there sets up the potential for a move as high as 2.00%.

But there is more at play here than just a near-term backup in yields. Riesner and Müller believe a 1.63% yield would not only break the downtrend in the 10-year yield that has been in place since the beginning of 2015 but also be the "ultimate confirmation that a major basing process in US yields is underway."

But not everyone agrees. Bond gurus Komal Sri-Kumar and Gary Shilling, who have been far out in front of this bond-market rally, believe the 10-year yield is going even lower, setting their sights on 0.90% and 1.00% respectively.

Stay tuned.

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It’s kind of silly that we’re even calling what went on Friday and over the weekend a “sell-off”, but that’s just indicative of how spoiled we’ve gotten by the absence of normal volatility this summer.

But summer is gone, like the headphone jack, and September is getting underway in a manner quite true to its volatile reputation.

So anyway, what’s do we make of this sell-off, shallow though it’s been so far? I turn to some of my favorite technicians this morning…

First, Ari Wald at Oppenheimer, who sees it as a buying opportunity. Ari notes that yields could back up on the 10-year to 1.8, 1.9% and still not present a problem for the equity market. The Taper Tantrum in 2013 is a good analog for this – stock volatility after Bernanke’s hawkish warning presented a fantastic chance to get long. He also notes that the Put/Call ratio is flashing a tactical buy signal, as well as the Vix spike.

Here’s Ari on what a Vix spike in the context of an uptrending stock market portends:

The recent spike in the VIX has also reached a buyable threshold, by our analysis. We define a VIX spike as a reading that is 50% higher than its 63-day low; this helps normalize for different volatility environments, and we consider the S&P 500 in an uptrend when the index is above its 200-day m.a. Spikes in the VIX typically occur around short-term market lows, and we’ve found it’s a more compelling signal when trend is positive. Since 1990, the S&P 500 has averaged an 8.4% gain in the next six months when this signal of selling exhaustion is triggered vs. a 4.2% gain during any six-month period.

Next, Jon Krinsky at MKM, no stranger to regular readers here. Jon sees Friday’s action as a fumble in the proverbial red zone. Just when the bulls thought they had it all sewn up for 2016…

The Bulls were driving down the field, looking to close the door heading into the fourth quarter. And then came Friday’s fumble, letting the Bears back into the game. After not suffering a 1% daily decline in over two months, the S&P 500 lost 2.45% on Friday, its worst day since the ‘Brexit.’ The question now becomes, does one day change the trend? In the short term, the break below initial support at 2155 on the heaviest distribution day in a year is clearly a set-back for the Bulls. Further, markets rarely bottom on a Friday, so some further weakness toward the 2110 area would not be surprising at this point. However, with 71% of the SPX still above its 200 DMA, high beta outperforming low volatility, and a 97% down volume day now behind us, we still think Bulls win the game.

Jon goes on to note that Friday’s “97% down day” – during which 97% of the volume on the NYSE occurred in stocks that were lower – represents the single biggest distribution day since September 2015. Since 2010, 11 of the last 14 such distribution days have seen the S&P 500 trading higher 3o days out.

Further, we’ve already seen a washout in the percentage of SPX names trading above their ultra-short-term 10-day moving averages – down to just 10.3%, the lowest reading since January. Here’s what that looks like:

Finally, let’s check in with Bank of America Merrill Lynch’s technical ace Stephen Suttmeier…

Stephen is somewhat constructive given support for the S&P 500 in the form of rising weekly moving averages and notes that what we’re seeing now is merely a test of the July breakout.

But he notes an interesting pattern change worth discussing. For a long time now, rising stock volatility has led to declining yields, as the fearful were reaching for Treasurys in times of distress. Not anymore. Now, it appears rising yields and stock volatility are a newly correlating pair…

Higher yields = higher volatility
Pattern change: higher yields = higher volatility Friday’s breakout in US 10-year T-note yields coincided with an upside breakout in the CBOE Volatility Index (VIX). Higher yields and higher volatility is a pattern change as recent upward spikes in the VIX prior to last week were associated with sharp declines in US 10-year yields rather than a sharp rise in yields

Have a look at Suttmeier’s yields vs Vix chart below:

Josh here – Stephen reminds us that the Brexit Vix spike this summer peaked out at 26.72 while the “world is coming to end” Vix spike from January / February got up to 30.90. Comparably speaking, today’s high-teens number could still have a ways to go.

Never a dull moment (for too long).

Sources:

Technical Analysis: Inflection Points
Oppenheimer – September 11th, 2016

A Fumble in the Red Zone
MKM partners – September 11th, 2016

Tactical breakdown on a complacent 90% down day as higher yields = higher VIX
Bank of America Merrill Lynch – September 11th, 2016

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The September top for stocks is in, according to UBS analysts.

Using technical analysis — the study of trading patterns to forecast changes in a security — Michael Riesner and Marc Müller wrote on Tuesday that Friday's sell-off was not a one-day event.

Markets got busy again late last week, as global bonds sold off, followed by US stocks when the market opened on Friday. The analysts pointed to the breakout in bond yields, and higher volatility in the bond market, as the trigger for the move in risk assets including stocks.

On Friday, stocks experienced their steepest sell-off since the aftermath of the UK referendum in June, better known as Brexit. Stocks rebounded on Monday, but lost much of those gains on Tuesday.

In early trading on Wednesday, they were little changed for the week, and the S&P 500 opened at 2,130.30.

According to the analysts, the S&P 500 on Friday broke its pivotal early-September trading low of 2,157, triggering a "tactical short signal," or a cue to expect further declines.

"With the Friday break down we are changing our tactical bias towards a more cautious stance since we see the risk of an 8% to 10% correction into late October/early November, where we have our next bigger tactical low projection for a classic year end bounce/rally," they wrote.

For the S&P 500, key support — a level below which traders would likely not allow the index to fall — is at 2,134/2,100, they said.

A drop below this level would suggest more weakness toward 2,000 — a level that was last tested during the sell-off in June after Brexit.

Another signal that suggests to Riesner and Müller a September top is the fact that the measures of volatility on the S&P 500 and Russell 2000 jumped.

"Together with the divergence on the volatility side in the VIX, and the Russell-2000 vola index, our weekly trend work turning short, plus the SPX breaking its early September trading low at 2,157, we have clear evidence that our suggested September top is in place,"they emphasized.

The UBS technical analysts are not alone in forecasting that the sell-offs late last week and on Tuesday are not done.

Goldman Sachs' equity strategists forecast that the index would fall and close the year at 2,100, less than 2% from its current level, before recovering in the subsequent nine months. Their reasons for this call included political uncertainty heading into the November elections and stretched stock valuations.

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Financial advisers and market strategists usually warn their clients that the market's performance in the past is not a reliable guide for its future moves.

But when Citi's Tom Fitzpatrick and his team overlaid the current chart of the benchmark S&P 500 with the index in 1987 — right before the crash — they got "the chills."

On October 19, 1987, the Dow Jones Industrial Average suffered its biggest daily percentage loss, erasing 22.6% of its value. The S&P 500 also crashed.

Fitzpatrick is a top strategist at Citi and studies charts of trading patterns to forecast changes in the stock market.

Besides the similarity in the chart, Fitzpatrick cited four other reasons for his concern about the market right now.

He said in a note on Friday:

• There's heightened concern about Europe and its banks. The UK has set a March 2017 date for when it will begin legal proceedings to exit the European Union, and Deutsche Bank failed to reach a swift deal that would lower its $14 billion fine with US authorities.
• We're in "the most polarizing US presidential election in modern times."
• More reports are circulating about central banks in Japan and Europe removing some of the economic stimulus they've provided by tapering their bond purchases. This is raising concerns about the efficacy of central bank policy around the world, Fitzpatrick said.
• And finally, some peculiar market moves: a 16% move in oil prices within a week; a 20-basis-point shift in US 10-year yields in five days; and a $90 move in gold prices in nine days. The Chinese yuan and British pound have made massive moves in a short period of time, too.

Fitzpatrick said the support level to watch for the S&P 500 is 2,119. That's the critical floor below which traders are unlikely to allow the index to fall; if it breaks support, they'll be looking for a new floor.

On Monday, the S&P 500 opened at 2,165.05 and was up by 0.7% in early trading. It has gained 6% this year.

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HSBC's technical-analysis team has thrown up the ultimate warning signal.

In a note to clients released Wednesday, Murray Gunn, the head of technical analysis for HSBC, said he had become on "RED ALERT" for an imminent sell-off in stocks given the price action over the past few weeks.

Gunn uses a type of technical analysis called the Elliott Wave Principle, which tracks alternating patterns in the stock market to discern investors' behavior and possible next moves.

In late September, Gunn said the stock market's moves looked eerily similar to those just before the 1987 stock market crash. Citi's Tom Fitzpatrick also highlighted the market's similarities to the 1987 crash just a few days ago. On September 30, Gunn said stocks were under an "orange alert," as they looked to him as if they had topped out.

And now, given the 200-point decline for the Dow on Tuesday, Gunn thinks the drop is here.

"With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT," Gunn said in the note. "The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX index, a barometer of nervousness, has been making a series of higher lows since August."

Gunn said the selling would truly set in if the Dow Jones Industrial Average were to fall below 17,992 or if the S&P 500 were to dip under 2,116. The Dow closed at 18,128 on Tuesday, while the S&P settled at 2,136.

"As long as those levels remain intact, the bulls still have a slight hope," Gunn said.

"But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast. The possibility of a severe fall in the stock market is now very high."

Watch out.

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Apple reports Q3 earnings after the close of trading on Tuesday. Wall Street always gets excited when AAPL reports, because investors and detractors are extremely passionate about the potential of the company—positive or negative.

All eyes will be on the “line items:”

• iPhone 7 sales
• Units shipped… Macs shipped… iPads shipped
• iPhone selling prices
• Gross Margins
• Will a new laptop be released?
• The China factor
• Guidance
• And Tim Cook’s spin on business

There are lots of “known unknowns” to assess before Tuesday evening, which is why I undertake a ritualistic chart-based exercise to see if my technical set-up work in AAPL provides clues about the likely reaction to the earnings release. The chart work enables me to strip away the fundamental pre-EPS hype to determine if AAPL is positioned either for a disappointment, an upside surge, or a neutral reaction?

The daily chart #1 shows that AAPL has carved out a 16-month rounded base formation, or accumulation pattern. Every time AAPL pressed into the 93-90 area since August, 2015, it found buying interest, which created a series of significant, elevated-volume lows that formed a big base of support. In addition, let’s notice that AAPL crossed from beneath to above its 200 Day EMA at 103 in late July, then successfully retested the up-sloping EMA at 104.40 again in September, after which AAPL rocketed to 116 (thanks in-part to the Galaxy Note 7 debacle).  AAPL has been trading between 112 and 118 for the past month, digesting its sizeable multi-month gains from the 92 area, allowing time for all of my “trading MA’s” to turn up into steepening, positive (bullish) slopes. The price structure is perched right near the high of the entire May-October upleg, poised for upside continuation, especially if a bullish catalyst emerges.

Chart #2 shows my comparison of the daily patterns that have unfolded between the benchmark S&P 500 (SPX), and AAPL. Since AAPL hit is low of 89.00 in the pre-market hours of May 13, 2016, the stock has climbed 30% into Monday’s close at 117.65, whereas the SPX is up just 5.8% during the same time period. Currently, AAPL is consolidating just 1.2% beneath its Oct. 10^th high of 119.00, while the SPX is trading 2% beneath its Aug. 15^th all-time high at 2193.81 and will confront heavy resistance in any effort to revisit its mid-August peak.

Finally, Chart #3 illustrates AAPL’s Relative Strength compared to the QQQ (NDX-100) since late July (AAPL represents 10.8% of the QQQ, and is its largest component). The Relative Strength pattern alerts us to two potentially significant characteristics about AAPL: 1) AAPL is outperforming the QQQ, the pattern of which exhibits bullish form, and indicates that money is more confidently moving into AAPL and out of the QQQ within a developing risk-on environment. Investors typically move money into the QQQ from its underlying components to achieve a greater measure of safety (risk-off). Just the opposite is happening now.. 2) the larger 4-year Relative Strength pattern suggests strongly that AAPL will continue to outperform the “safer” QQQ in the upcoming months.

What might we expect for AAPL in the aftermath of its forthcoming earnings report?  AAPL presents a very compelling independent technical picture, as well as a strong relative position vis-à-vis both the benchmark S&P and the QQQ (NDX-100). Although these set-ups in no way guarantee a positive reaction to earnings, AAPL’s overall technical set up indicates that the stock is poised to react positively to earnings news, and otherwise should absorb a mild to moderate disappointment. In other words, AAPL argues for an upside thrust, or a buy-the- weakness response to its quarterly report.

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