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Jason Haver: S&P 500, BKX, USB -- A Terminal Pattern in Equities?


The equities market hasn't made much headway lately and may be in the midst of a terminal pattern.

Monday saw the S&P 500 (INDEXSP:.INX) gap lower at the open (in an extended fifth wave), which was quickly retraced, leading SPX to close in the green. Neither bulls nor bears have gotten much accomplished lately, and thus both sides continue to keep options open for the intermediate term. I'm still inclined to give the intermediate edge to the bears, and presently, the 1910 level looks to be the dividing line.
SPX appears to be in the midst of a terminal pattern. Ideally, I'd still like to see another thrust up to a new all-time high, but it's not required.

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Over the past few weeks, we've discussed the fact that the high-beta indices, such as the Nasdaq Composite (INDEXNASDAQ:.IXIC) and Russell 2000 (INDEXRUSSELL:RUT), are in intermediate downtrends. Another index that I watch religiously (but haven't shown lately in the updates) is the KBW Bank Index (INDEXSP:BKX). BKX is also in an intermediate downtrend and has recently broken beneath a three-point validated uptrend line.
BKX is interesting because it hasn't even come close to taking out its all-time high, and my longtime expectation here is that it's simply forming a huge ABC correction. At the beginning of 2013, I was very bullish on this index, looking for a trip to 72 -- but that target has long since been captured, and there are potentially enough waves in place for the entire rally since 2009 to be complete.

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Finally, the long bond (USB) has held its breakout (as anticipated) and seems to be making a run at February's 138 target -- but, of course, blue-chip equities are still holding their own.

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In conclusion, right now the near-term charts resemble my 4-year-old's refrigerator art, so there isn't much in the way of surefire near-term targets at the moment. Looking at the bigger picture, though, the intermediate charts still suggest equities may be in a vulnerable position. Until blue chips signal the all clear for bulls, I will continue to treat this as a terminal rally. Trade safe.

Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

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No positions in stocks mentioned.
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