It’s now been almost a month since we posted our analog-based forecast [see: Analog Watch July 15.]  If it’s valid, we should see a sharp selloff over the next few days which ushers in 9-12 months of increased volatility and losses. From that post:

Ideally, an analog provides exceptionally accurate forecasts of a very significant move. I think this could be one of those and that stocks are on the cusp of the biggest drop since the Great Financial Crisis.

With currencies and VIX on board, all we need is for oil’s bounce to fizzle in order for the bears’ party to get started.Next up…lower lows?If it’s not valid, we’ll know very soon.

continued for members…

The Nikkei certainly seems to expect USDJPY to break down.

Along with USDJPY’s breakdown, we should see DXY slump to TL support……and EURUSD test its SMA200 again.

TNX should officially tag its .886.With VIX’s recent bounce off its SMA200, we should expect the channel top to be tested (at least.)A reminder…the analog’s current forecast:Checking in on DJI, the SMA200 will no doubt be tested again.

Likewise for some of the individual equities we’ve been watching. An even more bearish development for DB and, thus, global banking health.CL and RB were off earlier, but have bounced in the last hour or so in order to mute the initial downturn. UPDATE:  3:50 PM

A nice first day, with roughly 1/3 of the decline in the bag.

The analog says SPX 2856.42, but I suspect it’ll fall further reach the .618 at 2843.09 or channel bottom and .707 around 2816.47.  The most important metric, though, is that the 14th (Wednesdy) represents a cycle low.

Wherever it bounces, it’s supposed to come back on the 20th and make another similar low (ideally 2857.38 which I think is likely to be adjusted to wherever the channel bottom is at that time.)  The most logical sequence, IMO, would be 2816.47 now, a bounce up to 2971ish on the 16, and another drop to around 2818ish on the 20th.