SPX may be heading down below 1200

If you bought SPX at the bottom of 666 in March 2009, you have already more than double your money as it made a pivot high of 1371 in May 2011. My intuition tells me that you should sale, it happens that the market confirms in the same way. Below is a long term chart of S&P with an internal trend line drawn connecting the bottom of 2002 and the pivot high of 2010. It briefly climbed above the trend line for a couple of months, and now it is on the edge of breaking down below that line. Given the significance of the line, a break below it may trigger massive selling from the market.

Moreover, there is a clear channel within which SPX trade since 2008, except for the period of selling climax in early 2009. This channel has been successful in forecasting the pivot top made in Feb 2011. Please see my post here. If S&P decisively breaks down the internal trend line mentioned above, the target for the downward movement may be the lower line of the channel in chart below. This points to somewhere slightly below 1200.

 

JPY and AUD/JPY is moving towards a critical break point as well. Given the sluggish power that bull of risk assets was able to maintain during the past month and that oil may already have topped. Risk assets seem to agree with each other on the direction to the south. 10 year Treasury is unable to stay above 3.20%, a critical technical level I've been watching. 2s10s flattened significantly in the past month or so and 10s30s steepened sharply in the past weeks, both indicate that risk is off.