How Q2 Closes Is Important For SPX

* See UPDATE below...

Each candle on the SPX chart below represents 1/4 of one year.

• Q1 2015 is a spinning top candle (indecision)
• Q2 2015 is a shooting star (bearish warning)
• Q3 2015 is a bearish engulfing (bearish but needs a confirmation lower close)
• Q4 2015 is a bullish piercing pattern reversal candle, but such a candle is more effective after a decent drop, rather than stuck in a consolidation pattern at all-time highs
• Q1 2016 is a bearish hanging man (bearish but also needs a confirmation lower close on the next candle)
• Q2 2016 is an important candle, which will close this Thursday, June 30th, as it could be the bearish reversal confirmation candle that's needed for the Q1 candle -- a lower close is required

* UPDATE Thursday, June 30th:

As shown on the following updated 20-Year Quarterly chart of the SPX, the 2016 Q2 candle closed today at a higher level than -- on what was a previously potential bearish hanging man -- the Q1 candle. This bearish reversal warning was not confirmed.

Instead, what we're left with, at the moment, is a wide-range high-base consolidation for the past 6 quarters, with price now near all-time highs.

As shown on the following 20-Year Monthly chart of the SPX, a solid breakout and hold to the upside of this large range could produce a rally to a confluence of the top of a long-term channel and a 200% Fibonacci Extension level of 2280 (yellow) by roughly October of this year, and, eventually, another confluence of the channel top and a 200% External Fibonacci level of 2485 (blue) by approximately December 2017.

That's a very bullish scenario and one that may take quite a bit longer to play out, with, possibly, a lot more volatility sprinkled into the mix than what I've shown...anything can happen between now and then, but the potential is there, nonetheless.

Currency Canaries

* See UPDATE  below...

If currency markets continue to experience high volatility with a strengthening US dollar, I think equity markets, including North American markets, will follow suit.

So, I'll keep a close eye on those as potential canaries in the coal mine; e.g., to see whether the spread continues to widen (downward) between the SPX and the Pound:USD Forex pair, as shown on the Year-to-Date comparison chart below (the Pound lost 8.75% last Thursday and Friday).

Also, note the great disconnect, starting in mid-2014, on the 3-Year comparison chart below. I think currency markets were beginning to price in and forecast major world equity market volatility (that will, ultimately, be larger and last longer than most people currently anticipate).

Further to my last post on the World Market Index, price did, indeed, rally above major resistance of 1600 and appears to be forming an inverse Head & Shoulders pattern on the Weekly chart, below. However, a potential neckline is downward-sloping and price has fallen below 1600, once again, to the 60% Fibonacci retracement level. As well, new "SELL" signals are triggering (or are about to trigger) on all three indicators on this timeframe.

If price fails at current levels, I'd be wary of North American equities succeeding with any kind of sustainable rally, as it could very well be a short-term dead cat bounce. The currency canaries may provide confirmation of this potential event...worth monitoring.

Once again, price has plunged into the "Fragile Zone" (below 80) on the SPX:VIX Monthly ratio chart below.

As I mentioned here, a drop and hold below the 100 Bull/Bear Line-in-the-Sand level would signal that a downdraft is in store for equities. We saw the beginnings of that scenario play out on Friday, as the SPX lost 3.59%, following results of the UK Brexit vote.

We'll continue to see high levels of equity volatility as long as price on this chart remains below 100, and, to a lesser degree, below 150 (the next Bull/Bear Line-in-the-Sand level).

In conclusion, I'd re-iterate what I said in my March 3rd UPDATE to my post of February 17th...

     "We'll see if the newly penetrated 100 level holds as support now on the SPX:VIX ratio, as well as the 1600 level on the World Market Index, as shown on the following updated Daily charts of both. If so, it looks as though equity markets are in for a new bull run...possibly to new highs sometime this year. Otherwise, another failure of both of these levels will likely begin a new bear run to new lows."

The last sentence is the most important one to note.

* UPDATE Thursday, June 30th:

Something's gotta give...Q2 closed out today with an even wider spread between the SPX and the Pound:USD Forex pair, as the SPX continued to rally and the Pound continued to fall, as shown on the 3-Year comparison chart below.

The BREXIT Vote Wins...A Catastrophe Awaits

Further to my UPDATES noted on my last post, a massive Head & Shoulders pattern has formed on this GBP/USD Monthly chart...catastrophe awaits as price flirts with the neckline.

But, the FTSE 100 Index closed the week 234 points higher than last week...Weekly chart below...

...so, while it has not yet experienced the plunge like that in 2007/08, it is threatening to at major support (where it has languished for the past year), as shown on the Monthly chart below.

While volatility remains elevated in world markets, it will be difficult to get an accurate read on firm and sustainable market direction for the foreseeable future...particularly if the Pound remains below 1.40 and the FTSE 100 remains at or below current levels.

British Pound Hovers Precariously Above 30-Year Critical Support

* See UPDATES below...

In advance of Britain's "Brexit" or "Bremain" vote on Thursday, June 23, the British Pound has gained momentum as of last week, and Sunday evening as I write this post.

The current price of the GBP/USD Forex pair is 1.4581, as shown on the Monthly chart below. It will need to break and stay above that level and, potentially retest 1.50, which represents the next long-term resistance level.

A break and hold below the 30-year major support level of 1.40 could have catastrophic repercussions, not only for Britain's FTSE 100 Index, but also other major world indices. Price retested this long-term critical support level last week and is rallying.

Equities Look Vulnerable

What a mess! A drop and hold below 100 will signal that a big downdraft is in store for equities, as shown on the following Monthly SPX:VIX ratio chart.

Further background information can be found at this last post on the ratio.

WTIC Crude Oil & Canadian Loonie

If WTIC Crude Oil breaks below it's current (very tight) uptrend line, watch for the Canadian Loonie to tank.

As shown on the following 5-Year Daily chart comparing the two, they normally trade lock-step. Note the recent divergence of the Loonie starting in April and the fact that the RSI and MACD have fallen below the 50 level...which are hinting of further weakness ahead for Oil.

If Oil falls, I expect the Loonie will do so, as well. And, I'd be watching for a solid break below 75.00 on the Loonie as a possible signal that Oil will continue a drop to, perhaps, around $40.00, or lower, as shown on the next two 5-Year Daily charts.

USD/CAD Forex Pair Overdue for a Bounce

The USD/CAD Forex pair is well overdue for a bounce at the median of a long-term regression channel and the 40% Fibonacci retracement level, as shown on the Monthly chart below.

The Canadian dollar is price-sensitive to the price of WTIC Oil, so I'd keep a close eye on its action following the inaction of the participating countries to lower oil supply at this weekend's Doha meeting...Oil is -2.21 at 39.50 as I write this post on Sunday evening.

P.S. I'd also keep a close watch on the banks and DB.

On Vacation

I'll be on vacation as of this date, so I won't be posting much until late June (although I may slip the odd one in if time and circumstances permit).

In the meantime, I wish you all good luck in the markets!

Financials ETF Looks Weak

In my post of December 29, 2015, I stressed the importance of the Financials ETF (XLF) in, potentially, propelling the SPX to an increase of 5-6% for 2016.

You can see from the Daily ratio chart below of XLF:SPX, that price weakened considerably afterwards and fell to new lows not seen since 2012. Price is attempting to stabilize above that low, but all three indicators are still in downtrend and display new "SELL" signals, and price action is still under the bearish influence of the Death Cross formation of the moving averages.

If price drops and holds below near-term support of 0.0105, we could see a significant drop in the SPX, likely to new lows for the year, as I mentioned on April 3.

SPX:VIX Ratio Reaches a Critical Crossroads

Further to my posts of January 29 and February 17 (& March 3 update), price action on the SPX:VIX ratio has rallied and is now in between major support of 150 and major resistance at 160, as shown on the following monthly chart. The momentum indicator has also risen above the zero level and is hinting of higher prices to come at some point on this longer term timeframe.

Equity bulls will need to keep the price on this ratio above the 150 level, as well as break and hold above 160, and keep momentum above zero, in order to convince traders/investors to continue their buying spree to send the SPX to new all-time highs (currently at 2134.72, as shown on the following monthly chart of the SPX).

Otherwise, a drop and hold below these levels will see volatility return to the equity markets -- likely in a substantial manner -- to send them to, potentially, new lows for the year. It should be noted that the momentum indicator on this chart is not yet above zero and is still in a downtrend, so it is not yet confirming that higher prices are in store for the SPX...so, keep a close eye on the SPX:VIX ratio for signals.

New "Buy" Signals for Equities

* See UPDATE below...

New "BUY" signals have just formed on the RSI, MACD and PMO indicators for:

• SPX:VIX ratio: Price still needs to cross and remain above the 100 level, as outlined in my post of January 29th, and, thus, is still aimless and directionless within the "Uncommitted Zone."

• MSWORLD Index: The RSI is about to cross above the 50 "BUY" level, possibly by tomorrow (Thursday). Major resistance lies above at 1600, as also mentioned in the above post.

So, while we are now seeing fresh "BUY" signals on these charts, we'll need to see a convincing follow-through and a break and hold above these resistance levels to confirm that a new bull market is emerging in equities, especially in view of the economic weakness that was reported in the last Beige Book Report.

* UPDATE March 3rd:

We'll see if the newly penetrated 100 level holds as support now on the SPX:VIX ratio, as well as the 1600 level on the World Market Index, as shown on the following updated Daily charts of both. If so, it looks as though equity markets are in for a new bull run...possibly to new highs sometime this year. Otherwise, another failure of both of these levels will likely begin a new bear run to new lows.

Banks and Oil Don't Mix

As WTIC Crude Oil goes, so goes Deutsche Bank, as shown on the 5-Year Daily comparison chart below.

Right after the opening bell this morning, DB made a new 5-year low of 15.95, as shown on the Daily chart below. There's no confirmation of a reversal in sight, technically, yet for DB, although the RSI may be hinting at a bit of a slowdown in the plunge.

Meanwhile, Oil is trading at 30.06...1983 prices, as shown on the Monthly chart below.

Both DB and Oil have been especially weak since mid-2014 (DB began falling at the beginning of that year, so whether it was forecasting weakness in Oil is a matter for consideration)...two to watch to see if either gains any support in the near future, or continue their falling-knife action.

*P.S. You can read more regarding the woes facing Deutsche Bank here and here.

Nikkei Index Teeters on the 2007/08 Brink

*See UPDATE below...

Japan's Nikkei Index is currently trading just above the 17,000 level as I write this post around 9:00 pm ET Tuesday and is down around 3.3% from yesterday's close. You can see from the Monthly chart below that this is around the same level just before the 2007/08 crash.

A drop and hold below 17,000 could spell another big plunge in this index and confirms what I mentioned in my post of January 29th. If it holds, this "island reversal" candle formation on the Daily chart below should produce some "interesting" results!

*UPDATE February 9th:

The above bearish "island reversal" candle formation has been confirmed. After last night's 918.86 point drop, the Nikkei Index now sits just above 16,000, as shown on the following Monthly chart.

Major support sits at 14,000, followed by 12,000.

At the moment (10:05 am ET), the USD/JPY Forex pair is trading at 115.22, as shown on the following Monthly chart.

Major support lies far below at 110.00, followed by 100.00.

The recent extreme moves in both the Nikkei Index and the USD/JPY Forex pair tells me that volatility is not yet over, and, in fact, may have just begun.

It's Now or Never For Bulls

Was today's (Friday's) world-market rally serious and sustainable, or simply a knee-jerk reaction to Japan's surprise NIRP (negative interest rate policy) announcement last night (including some shorter-term short-covering action) and "end-of-month window dressing" by fund managers?

Perhaps the following update to my last post will provide some further insight into that question, as I review a variety of markets.