Hold On To Your Hats!

Volatility is up!

And what next for the S&P 500?

Technically: Key support for the up-trend from 2011 lies at or about 1900.

• a technical breach of this level will likely see continued weakness and a potential test of the longer term support (up-trend from 2009) at or about 1600.
• This is also close to the top registered in 2007 and (if it holds that level) will defend the theory that we are in a new secular bull market.
• that would also be approximately 20% lower than current levels.

Otherwise, the S&P 500 will have to re-test up-side resistance at 2100.

• and break-out to higher prices to keep the current up-trend (higher highs and higher lows) intact.
• current price activity suggests that this will be difficult to accomplish,

Fundamentally: it is earnings season:

• share prices have priced in continued positive earnings growth,
• Q3 earnings blew out expectations,
• Analysts have revised Q4 earnings expectations lower,
• We are now at the beginning of Q4 earnings announcements,
• time will tell,

Should you worry?

• not if you have a balanced and globally diversified portfolio,
• bond prices are rising and offsetting equity market volatility,
• and remember: Central Banks do not like volatility and they will use monetary policy to try to keep financial markets from disorder.