This Time It’s Different

The analog we’ve been following since Feb 6 [see: Analog Watch] has proven pretty accurate in terms of prices, but has been off by a day or two a few times.



Yesterday was another potentially important deviation.  SPX opened higher, but fell steadily throughout the day — retreating, as expected, to the channel midline where it remains.

VIX had a golden opportunity to reverse lower after tagging its SMA10, as it has countless times before.  But, it didn’t — at least not yet.USDJPY even broke down, dropping through the bottom of the rising channel that suggested a return to the bullish side of a trend line from Jan 7. Perhaps the most troubling development for the bulls, however, was the yield curve breaking down.  It wasn’t a lot, at least not yet.  But, it’s a breakdown.  And, as we’ve discussed several times [see: Does the Yield Curve Matter? A Closer Look], this doesn’t bode well for stocks.The big question, then, is whether the algos can be brought to heel.  Perhaps the VIX can still be crushed by 20%, yields can correct, and USDJPY will regain its uptrend.  But, if not, the higher highs suggested by our analog could be very, very difficult to achieve.

We’ll look back at our base period, and why this time could be different.

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