|30 yr T bond w/ S&P 500 (shaded area)|
The S&P 500 (purple area) has more than fulfilled its downside obligation in service to the Head & Shoulders top. Technically, it can bottom for the expected short-term rally back to the (red) neckline (1260 +/-). While last week was disconcerting for the bulls, it may actually be setting the stage for a more sustained (yet ultimately ill-fated) rally toward the neckline.
The other feature of this chart is the 30 year Treasury bond price. The July break above former resistance (now ‘green’ support) was the knee, and everything that has happened since is the jerk. It is similar to what is going on in gold, except that gold carries real, obligation-free monetary value and is launching from a consistent technical uptrend in all currencies, implying that globally speaking, people have been systematically buying the metal. The bond is on an impulsive and panic-fueled rise as players jerk out of stocks and seek reputed safety from the degrading stock market situation.
If and when SPX finds a bottom and rallies, the long bond is going to drop like a stone. But during times of stress the great inflator still has no problem pitching its wares to the masses. All it takes is a good scare in the stock market. UST’s are loaded on the port side of the boat and certainly can correct when things stabilize, at least down to one of the Fib retrace levels noted on the chart.