Charts: The S&P 500 plunged back down through its 50-day moving average today. This means the correction is ongoing. Volatility is back to record highs, which is bearish. The huge rally that began in the fall first saw coiling behavior from the index, or we could call this a wedge pattern. Generally speaking whichever way a wedge breaks to after it has narrowed to a sharp point is the direction the market will go in the medium term (some months). Right now copper has formed a lengthy wedge pattern and seems to be breaking to the downside. Copper is more than just a metal, it is an important technical indicator. So it is bad that it has broken down out of its wedge.
Fundamentals: China's GDP growth, while still high at about 8%, has slowed sharply. This is why the market sold off today. However the Chinese GDP report also showed that Chinese loans grew sharply, setting up the Great Dragon for economic growth later in the year when the result of all those loans will be felt on the street. What this means is that we are back to the price of oil being the key factor for the global economy. If oil comes down, then that sharp uptick in Chinese loans will spell further growth for the world economy. And the price of oil is contingent on the anti-nuclear talks with Iran and 5 plus 1 that just started in Turkey.
Long War: Stay tuned over the weekend for my analysis of the Iranian talks.
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