For the first time in weeks, various asset class charts appear to be aligning toward a sudden shift and one that appears more likely than not to be toward a round of risk-off.

Starting out with equities, each of the indexes is showing a Pipe Top that should produce a 1%+ decline tomorrow as shown in the chart of the Nasdaq Composite to the left and a pattern that will take its topping pattern defined by its lower highs close to its initial confirmation at 2600.

One sign that the Nasdaq’s pattern will confirm and a pattern that could bring about a 5-10% decline as is true for the other equity indexes is shown in the nearly confirmed pattern in the XLF to the right.

Worth noting is the fact that it was the XLF’s Descending Triangle that confirmed and began fulfilling first back in May after this year’s current peak in late April. Should that precedent prove pertinent in relation to the current trading action, the XLF’s nearly confirmed Descending Triangle may be a bearish signal – a very bearish signal – for equities in the weeks ahead.

Turning to the CRB Index, it is trading in the all-too-familiar Symmetrical Triangle showing across the equity indexes and individual securities and this pattern carries an upside target of 330 and a downside target of 300.

One reason to think it will chase the lower target is shown in the bearish Descending Trend Channel to the right.

Clearly its top trendline has acted as excellent resistance over the last 6 months in a demonstration of the intermediate-term downtrend showing in the commodity complex.

Should this top trendline remain resilient relative to its resistance, expect the bottom trendline of the Channel to assert target-like pull and bring the CRB Index down to at least 300 – the level of an inner unmarked descending trendline – if not closer to 280 and a level that is truer to that bottom trendline and to a longer look at the CRB Index’s charts.

Commodities, then, appear ripe for a fall as is the case for equities, and thus it seems that there is a round of risk-off ahead.

However, let’s take a quick look at the – relative – safety side of the equation in the form of the US dollar and Treasurys and starting out with the dollar index that appears to be trading up toward the top trendline of its Symmetrical Triangle in what may turn out to be a bearish Rising Wedge in a few weeks but should act bullishly for the dollar index in the days to weeks ahead.

It is unclear how high this pattern might take the dollar index before potentially dropping it back down but 80 seems like a fair ballpark estimate considering that is the rough target of the bullish Falling Wedge that it is fulfilling currently along with a weekly Pipe Bottom as discussed this morning.

Overall, then, the dollar index does seem to support some sort of flight of fear through a flight to safety – relative safety – in the days to weeks ahead and this is consistent with the message of equities and commodities about risk-off in the near-term.

Turning to Treasurys and consistent with what was written over the weekend about SHY and TBT, it does seem that Treasurys – short and long – may strengthen in the days to weeks ahead.

As can be seen in the charts on the following page, the yield of the 1-Year looks set to drop close to 0% with yields trading inverse to price as the 10-year appears ready to move back down toward 1.75% again.

Both potential moves would be made on bearish appendage patterns that will confirm if each yield drops below 0.09% and 2.00%, respectively.

Should shorter and longer Treasurys strengthen alike, this will have nothing to do with Operation Twist and everything to do with investors desperately trying to rotate out of risk and into “safety”.

Why one would give the US government one’s money for nothing is beyond me, but at least it’s a bps or two better than paying the government to hold your money as has occurred – astonishingly – with some of the really short bills in the not-so-distant past.

Should this moment be upon on us, though, when the 1-year does sink closer to 0% as equities and commodities decline 5-10%, it would seem to be the very definition of risk-off.

Todays Ichimoku, everything is above the cloud today so things are looking good. I suspect it won't be as easy as it looks but I will focus on the 32 -33 area for a long. Might/should happen tomorrow so I will be on a tick chart to see better how things play out.

Nice bull flag? or pennant?

bluemele 

Nice bull flag? or pennant?

I'm still favoring the bullish scenario on the TF but.....?

Here's the PT take on it:

Hopefully it won’t be me getting hit by this call being made without the buffer of a question mark, but the charts look bearish. Even the charts that “should” look bullish look bearish and so it seems a bear slap born of lower highs is on the way.

Rather than turning this into a charting bonanza, though, let’s keep this somewhat brief and focus on the leading proxies for risk or small cap, tech and copper and let’s throw the financials in the mix too too considering the sympathy trade going on there around the banking and sovereign debt crisis in Europe.

And starting out with that sympathy trade, it seems to me that Italy’s pledge to get a government in place – now there’s an idea – followed by some austerity – ask Greece how that’s working out – may keep the crisis contained for about as long as the October 28 vision for a plan to save Europe and that was four days including a Saturday and a Sunday.

Specifically above, the XLF is showing:

- A nine-month downtrend as demonstrated by the Descending Trend Channel in blue,
- A three-and-a-half month uptrend with a strong sideways component shown by the Ascending Trend Channel in green with a bottom trendline that the XLF is currently using for a high bar routine that it might fall from, and,
- A Descending Triangle in purple that is about to break and conceivably to the downside as a pattern with more bearish tendencies and despite the possible Bull Flag Pole.

Overall, then, the XLF’s chart can be described by a lot of “d” words including descending, down and decline and this would seem to lead to the “b” as in bearish.

However, perhaps the XLF uses that bottom Triangle trendline to fly higher and so levels are the way to watch it and if the XLF, breaks $12.83 at all, consider its chart bearish and probably on the way to the downside target of about $11.50 while a move above $13.37 can be taken as a sign that it might climb above its 9-month declining trendline to $16 or so.

Considering that the XLF used the last two Descending Triangles in red to move down, through, there is reason by way of pattern repetition to think that this Descending Triangle shall break down too.

Now and quickly, let’s look at the Russell 2000 and quite frankly, this chart does not look as bearish as that of the XLF.

As can be seen, it does appear that the current period of consolidation in that Symmetrical Triangle could lead to a continuation of the nascent uptrend – rocket relief rally – to precede it.

However, it is important to remember that the consolidation – the picture of doubt looking for clarification – comes on the top of a bearish Rising Wedge that is calling for a 10-20% decline from current levels that will be signaled by a potential downside breaching of 708 while a possible move above 769 would signal that a nice move up was in store.

Turning to tech, this chart of the Nasdaq Composite just does not look good to me with its lower highs atop a possibly massive and bearish Rising Wedge that is also calling for a 10-20% decline.

In some ways, the chart of the Nasdaq Composite looks as bearish as the XLF’s charts but the levels to watch are 2753 on the upside and 2602 on the downside and a breaching of either should serve to tell what direction it will travel in by 10-20%.

Lastly and there is more detail on this in a note from this afternoon, the chart of copper is on the cusp of a break and a break that is likely to be big and probably down.

Specifically, copper appears to be fulfilling a bearish Rising Wedge to the downside through a bearish Symmetrical Triangle that has taken copper below the possible Ascending Trend Channel born of the last month.

Unless copper pulls itself back into that Channel by rising above $3.55/lb and a move that might signal copper will find $3.75/lb, it seems more likely that copper will continue to fulfill that bearish Rising Wedge by dropping toward its target of $3.00/lb.

In turn, it would seem that copper’s lead around fulfilling its Rising Wedge to the downside in the guise of some tight sideways trading might be the best signal that it’s time to get ready for a bear slap.

I can see the bearish case, but another index to consider is the Nasdaq 100, which has worked through most of its resistance already and is only only 3% away from making new highs for the last 10 years. If it breaks out, it could pull the others up with it. Although they've got a lot more resistance to work through, so might not break the highs themselves.

Mid day update...things could as always go the other way but I'm still favoring the bulls. It's beginning to look like a breakout is imminent, if 733ish holds should be good. I do acknlowledge the possibility of it dipping down past that but would like to see the 740 area hold at this point. I will take another look later on.
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Side note: as of this writing things are looking like a pullback of some kind is happening so I'll be focused on the above mentioned areas probably sooner rather than later.....

I don't have a Russell chart up. But on the SP500, volume has definitely been on buy side. Only problem,we haven't taken out yesterday's high --- but we did take out yesterday's low.

Mike

Really looking top heavy at this point, still could spin around but....
CS has dropped to the middle of the cloud, the 1hr (not shown here) has gone entirely below the cloud so the wait drags on for a daily trade. As some of you that viewed Mikes webinar w/chris Capre know, Chris was of the opinion on the ES (which is more or less what we are dealing with here big picture wise) that a extended period of consolidation or even a drop could occur looking at the present Ichimoku chart. so we'll just have to wait it out some more.

Well it has taken three weeks for the invitation to be accepted if it should be at all, but the observation was made here on October 27 about the possibly bearish connotations of the S&P being 9% above its 50 DMA with its past dalliances leading to a bearish reconnection on the downside.

Now nearly 21 days later and it seems likely this dance will occur after the S&P’s two bearish smooches with its 200 DMA and this leads to the question of whether it might dance nicely with its 50 DMA as was the case last November and this past April, May and July or whether it might try to escape that step by falling well below it as occurred last August and this past March and, of course, this past August.

None of those previous crosses is really a good comparison with the possible exception of last August as can be seen above to the left and this means it is probably wiser to look at the S&P’s current patterns to see what each may say about the outcome of this possible rendezvous.

Starting out with the Symmetrical Triangle that the S&P confirmed today with its drop through 1225 and then safely with an intraday move below 1215, it seems likely that the S&P will move through that 1215 tomorrow and perhaps even to its 50 DMA at 1206 considering the ominous look of today’s candle.

If so, it makes sense to look at that pattern’s target of 1150 as there will be a good chance that is where the S&P will find itself in the days or weeks ahead.

This turns our attention to the bearish Rising Wedge in red that carries a target range of 1075 to 1116 and something that would certainly seem to exercise some sort of target-like downward pull over the index to the 1150 target of that Symmetrical Triangle if not to its own target range.

Summarized and this applies to the Dow, Nasdaq Composite and Russell 2000 too, it appears that the Symmetrical Triangles that each has confirmed to the downside today is calling for a 5% decline whereas the bearish Rising Wedge pattern in each index is calling for a 10-15% total decline from current levels.

Should the broader indexes follow the XLF and the nearly 7% decline it has put in over the last five trading days, it seems that some portion of those bearish patterns will be fulfilled.

This potential for a round of risk-off, a bear slap and some consolidation coming further undone is nearly confirmed in the chart of copper too as shown below.

It has declined 6% in the last 6 days and its apparently bearish Symmetrical Triangle is confirmed and will find safe confirmation should copper crawl beneath $3.35/lb.

Overall, then, there are many reasons to think that the Symmetrical Triangles in the equity indexes will bring on a 50 DMA dance but that those Rising Wedges may ensure it will be bearishly brief.

Was just thinking about this coming week and honestly don't see how the market won't drop with the inevitable failure of the "debt commission" or whatever the label is. So I guess I'm looking for a good spot to look for a short....and I've come up with the 733 area. Seems like a decent spot, though I could see a probe type situation happening to BS some of the longs. Anyway that's my thought on it at the moment....