My post of July 14 discussed the trade war between China and the US and the effects it was having on China, in particular. Since that date, I added several important updates on that post, which are definitely worth reading…the latest one was earlier today (Monday).
The following World Stock Markets heat map shows the major losses incurred by world markets at their respective closes today…not a pretty picture.
Volatility has ramped up significantly since July 26 and price closed on the following SPX:VIX monthly ratio chart well below the 150 Bull/Bear Line-in-the-Sand level at 115.69.
Price action on this ratio peaked in January 2018 and it has made a series of lower highs, which are clearly evident on the next three charts (depicting monthly, quarterly and yearly timeframes, respectively)…indicating that the successive rallies in the SPX were getting weaker.
A drop and hold below 100 on this ratio could produce an acceleration of the selloff, sending the SPX down to, at least 2600, or even 2400, as I described in one of my updates in the above-mentioned post.
A drop to 2600 would land price on the median of this long-term uptrending regression channel (after nearly tagging a target price of 3047 identified in my post of June 29), as shown on the following SPX monthly chart.
And, as I warned in my aforementioned post of June 29, the alligator formations on the YM, ES, NQ and RTY E-mini Futures Indices have now crossed, hinting of further weakness ahead.
Of note, is price relative to the 200-day MA (yellow). If we see an acceleration of selling to take the ES and NQ below it, I’d say that the SPX has a good chance of hitting 2600, or lower…watch for price to drop and hold below 100 on the SPX:VIX ratio for confirmation. Inasmuch as the YM and RTY are already below their 200 MA, we’ll see if they can catch a sustainable bounce anytime soon to lead the other two back into recovery mode. Otherwise, look for the YM and RTY to lead the others in a continued selloff.