As I outlined in this weekend’s write-up titled “Animal Farm” a number of very pronounced negative divergences can be found across multiple indices. A quick look at key weekly trend lines in the $SPX shows a confluence that could possibly point to a very pivotal time for the market this week:
The latest rally has produced such a steep trend line that a break may make a visit to the weekly 21 moving average a likely proposition, especially considering the $SPX is over 60 handles removed from its 50 daily MA. Even a visit to the weekly 50MA may become an eventual target on such a break down given the large scale deviation.
None of these potential moves constitute a crash or bear market, but would rather represent historically mild corrections. Given the complete lack of volatility in recent months these moves however would likely feel more significant to market participants who have been lulled into a false sense of complacency and certitude about the direction of the market. We shall see.