Per our analog, today is the next significant turning point – important in terms of confirming the direction and distance of the market’s next move. It has done an excellent job of forecasting the reversals, rallies and drops since we first posted it on May 13 [see: Analog Watch.] The first time I came across one of these, it worked out spectacularly. I started noticing in May 2011 that the turning points and rallies/declines which had been occurring at that time very closely matched those of the 2007 top.

Just after Day 32 in late June [see: Deja Vu All Over Again] I began laying the entire roadmap which would presumably end with a very sharp drop of around 20% by Day 70. As it turned out, the S&P 500 plunged 19.6% by Day 69. Details are available HERE.

The current analog is different in terms of how quickly things will play out. If it plays out, however, the market is in for much greater losses in the months ahead.

continued for members…Futures are off about 40 points so far, but the TL from May 20 hasn’t yet broken down. There are still some adjustments being made, such as lowering the September bounce point. It’s probably still too high, but I’m working to reconcile it. Note that COMP didn’t quite reach its neckline backtest. It’s not clear whether it will or not. Nor is the downside target set in stone just yet. More work is needed.I’ve been on the fence regarding VIX’s drop. The SMA200 is still a possibility – the falling white channel reaches it this morning – but that would probably mean new highs for stocks. And, I think this leg has already played out. A rise above 26.44 would help move things along for the bears. Currencies are aligned nicely for a drop. EURUSD and DXY have finished backtesting and Japan has officially admitted it has too much inflation.

This is important because a falling yen is the last thing the BoJ needs in order to fight inflation without raising rates. Once the USDJPY tumbles, it will accelerate stocks’ decline. Oil and gas are still imponderable – though RB seems to have sniffed out the 2.24 Fib at 4.5485… …which has the 10Y back above that internal TL.