Farming On The Slopes of Vesuvius

I've mentioned a few times over the past few months that the equity indices are likely in a topping process, and a few days ago that the setups on NDX and RUT had reached a stage that I would expect to see at a major top. The same is true of SPX. Do I think these patterns will play out? Most likely yes.

I'm not expecting them to play out right now, but that's mainly because big declines are a rarity in December. These tops have formed, but I'm expecting the markets to limp along through December until the winds turn more bearish in the January to March timeframe,

I may be mistaken however, and if I am then these topping patterns may have already started what will likely be a strong retracement of the huge move up from the March 2009 low. That decline could be triggered, as hard as a I find it to believe it, by the Fed increasing interest rates from almost nothing to slightly more than almost nothing next week.

If that is the case then I'd still expect this thrust down from the triangle to end soon, and we should still see that full triangle thrust retracement back up to 2067, but that could be it. If the Fed shrinks back from acting now, or the market shrugs off what is in truth, not much of a change, then there might just be one more all time high left in SPX before the retracement takes hold. SPX monthly chart:

NDX monthly chart:

RUT monthly chart:

Either way it's important to put this market top in context. It might feel like the end of the world for SPX to retrace back to retest broken resistance in the 1575 to 1600 area, but on the bigger picture this would be just a backtest of broken resistance on the SPX secular bear market pattern from 2000-13 that I posted in June 2013. You can see that post here. That pattern has a target in the 2440 area and after this retracement ends I'd be looking for that target to be hit in the next cyclical bull market, probably starting sometime in 2016.

Stan and I are doing a free to all webinar at theartofchart.net with our forecasts for 2016 on equity indices, currencies, precious metals, energy etc on Thursday next week and if you want to attend that you can sign up for that here. Spaces are limited so if you want to attend then you should sign up sooner rather than later.