Ok, moving on to today's topic, I want to show that technical analysis in alive and well as demonstrated by recent action in the S&P 500. Back on September 10, I showed how it was forming what I called a dangerous bear pennant. Essentially, the index was forming a classic dead cat bounce pattern which, according to technical analysis, tends to fail more often than not. And today, we have the proof:
Unless you enjoy gambling, I'd suggest sitting tight this week as the Fed's policy decision looms. Who knows what shenanigans we'll see in the financial markets once their decision is announced. There will no doubt be knee-jerk reaction moves in equities, bonds, currencies, and precious metals, so give it a few days after the announcement to get a clearer picture of how the markets react.
From here, I would expect a fall to 1870 (about 3.5%) to the August 24th lows. From there a brief bounce would be typical before resuming its fall. Ultimately, I would expect the index to revisit its 2014 lows of somewhere around 1750 - a full 10% lower than today. If/when that happens, we'll step back and see what the charts are telling us. Until then, caution is definitely warranted.