Something has occurred that I have never seen before in the indices – and it could be the Bullish technical action I need to declare “All Clear” for Santa’s Rally (when/if today’s downdraft is completed/reversed)… OR …it is The Tell we are on our next leg down – to potentially $2500 SPX. I saw and announced it in my Live Trading Room at 10:30 AM before the downdraft.

ALL THREE INDICES – SPY QQQ DIA – just triggered 2-bar reversals which is bearish.

That may seem like nothing to a macro, intermarket, fundamental or sentiment trader but I am also a strategic technical analyst using pattern recognition and this rare pattern is a Big Tell: ABOVE is BULLISH; BELOW is BEARISH. And right now it’s ON MY RADAR AS A SHORT:

So my call in my Live Trading Room is thus: (LRE = low-risk entry)

SPY > $279.30 close on Hourly is bullish, otherwise it is a LRE short

QQQ > $172.33 close on Hourly is bullish, otherwise it is a LRE short

DIA > $258.73 close on Hourly is bullish, otherwise it is a LRE short

Transports are scaring Dow Theorists

Showed this chart in the Week Ahead post and updated yesterday in my Live Trading Room as this relational study showed it was turning down so to look for ‘stuff’ too short: FDX and UPS being my fave go-to shorts when this ratio rolls over. Well, it happened a tad quickly today: as of noon FDX -5.7%, UPS – 6.3% with airlines and rails tanking. Careful. Not Done.

About that Approaching Rate Spike Call …

Clearly, the 10-year is not done falling yet… but I am expecting a reversal in the 2.9% area as I suspect the Fed will not want the psychological damage let alone credit concerns that accompany a 2-10yr yield curve inversion.

Actual inversion will slow the allocation of leveraged money to corporate/private credit and that causes current credit to start weakening, and those who hold this credit on leverage must begin to unwind – aka 2008/2009. My point: historically, an inverted yield curve has CAUSED a breakdown in corporate credit which has LED to a recession. I am betting the Fed will want to avoid that.

If the Fed does not reverse the inversion, market will be a ‘short-at-will’ event.