Plunge In Front Of The Fed

"I never thought I could feel this way
And I’ve got to say that I just don’t get.”
-Gordon Lightfoot, If You Could Read My Mind

The SPX and NAZ fell sharply Tuesday following the previous day’s break below zero by the McClellan Oscillator and the resulting downturn by the Summation Index shown in this space.

To recap, this decisive break was in the McClellan’s was the third in the previous seven sessions and underscores that the NYSE and NAZ Summations are in downtrends.

As well, we got a clear break of support in the Lumber/Gold ratio which signals weakness ahead for the economy and is often a precursor to sharp sell-offs in the stock market.

This is an indication the US economy is sliding into recession and over the decades has provided reliable signals of sharp market weakness immediately ahead when this alert sounds.

Indeed, following Monday’s stab down in the precious metals, Tuesday saw a Reversal of a Reversal or what I call a Keyser Soze after the viciously volatile character in the movie The Usual Suspects.

Fast moves come from false moves so Tuesday’s turnaround in the precious metals/miners suggest an upside breakout is on deck.

This suggests GLD is poised to come out of its big Cup & Handle.

As flagged last week, the metals are 180 days/degrees from their early November lift-off so this could dove-tail with current upside acceleration.

Notably, the market plunge took place in front of today’s Fed Day which is unusual.

Notably, the precious metals rallied sharply in the wake of Tuesday’s downdraft in the stock market.

This is a conspicuous change in character.

Caution is warranted as the SPX reversed with authority after striking our 4187 target on the nose on Monday.

A weekly SPX shows a breakout of the bear market declining tops line (blue) connecting the all-time high with the early February high.

This  forms the top of a triangle formation, the bottom of which is a trendline connecting the October/March lows.

This breakout occurred 4 weeks ago in early April. A decline back below the breakout point is a bearish event. It suggests a false breakout and as offered above fast moves/sharp moves often times follow false moves.

Currently, a failure below this triangle occurs violating the 4070 region.
This is a yellow warning flag of an impending Triangle Pendulum sell signal.

A Triangle Pendulum SELL signal is triggered when an item breaks out to the topside of a triangle and then soon after reverses below the breakout and ultimately through the bottom of the triangle. (The reverse is true for Triangle Pendulum buy signals).

This would occur on breakage below the bottom of the triangle, the October/March rising trend line now at the 3940 region.

This would be a blaring sell signal. Since this is a weekly chart, it suggests a new leg down, Intermediate Wave 3 of the Bear is in progress.

On the above weekly, you can see that we had a Triangle Pendulum buy signal in early April (purple ellipse).

The SPX violated the bottom of a triangle and quickly reversed to the topside and out of the larger triangle.

Consequently, we have a double Triangle Pendulum setup.

It will be triggered on breakage below the top blue declining tops line.

Notice that last week was an outside up week in the SPX.

So trade below last weeks low will trigger a Keyser Soze on the WEEKLY SPX…a Reversal of a Reversal.Fittingly, the market finds itself in this position going into the Fed.