All month long, various indicators have been arguing for an equity market correction. For instance, on the last day of November, the Short-Term Indicator Score, a measure of equity market sentiment over a one to five day horizon, reached overbought levels (Exhibit 1).

S&P 500 with Short-Term Indicator Score

Further, on December 2nd, the trade-weighted US Dollar Index (DXY) posted a bullish outside day reversal pattern, which portended additional DXY strength over the near-term. In the current climate, a USD advance has generally been consistent with a flight to (relative) safety, and by extension, weakness in risk asset prices. Accordingly, the signal for higher highs in the greenback likewise indicated equity price declines.

Moreover, Jason Haver, contributing author at, pointed out on December 6th that when the CBOE Market Volatility Index trades outside of its Bollinger Bands for four consecutive days, prices generally decline. December 5th marked the fourth straight day where price action in the VIX stepped on the toes of the lower Bollinger boundary (Exhibit 2). By now, the inverse relationship between VIX and equity prices is well documented.

S&P 500 with Bollinger-Banded CBOE Market Volatility Index

Similarly, on December 7th, the 10-day moving average for TRIN troughed. Bottoms in this volume-based measure of market price have corresponded fairly tightly with equity price peaks in recent history (Exhibit 3).

S&P 500 with TRIN 10-day Moving Average

And now today, with the S&P 500 down over 11 points as of the time of this writing, the short-term Coppock Curve is also likely to top during the current session (Exhibit 4). In fact, by my math, a rally from the current 1,214ish to about 1,233 would be required to stave off the coming inflection (even still, my static-price analysis suggests that such an advance would only postpone the peak in the daily Coppock Guide by one day); anyway, I deem such a rebound unlikely.

S&P 500 with Coppock Guide (Daily) Momentum

While, I have done a reasonable job of predicting shorter-term inflections in recent months, for weeks I have been entertaining two (mutually exclusive) potential paths for equity prices over the medium-term. Both scenarios end badly for equity prices, but one is imminently more bearish than the other. Both counts are still in play, however, price action over the last couple of days appears to be favoring the more bearish scenario. Nonetheless, given the unabated murkiness of the longer-term outlook, I am reticent to make predictions one way or another. However, I do believe that the window is closing on the prospects of meaningful upside through year-end. Additionally, the looming deterioration in short-term momentum likely poses a headwind that will persist into early-January. In sessions to come, the market will likely offer more clues as to what lies in store for equity investors in months ahead.

Stay nimble and stay tuned.