I believe the market is going to have a minor sell-off, and soon.
In the bond market, I’m seeing a descending triangle pattern occurring, which tend to break down — especially with interest rate rising.
Rising interest rates usually leads to market weakness. Check out the monthly chart of long-term Treasurys above. As you can see, bonds have been trending lower for about five months now.
Keep in mind though that a minor sell off isn’t the end of the world. In fact, I believe it’s exactly what the market needs to find some balance before making another move higher.
Another red flag I’m seeing in the market right now has to do with the NASDAQ. Based on the RSI, it’s overbought and due for a pullback.
The S&P 500 is showing similar signs of a pullback as momentum levels simply cannot keep up with the price, creating divergence and a grossly overbought market.
But again, it’s something the market needs right now, and this should set us up for a health rally in 2020.
Expect a nice cool-off and low volatility as weak hands are being pushed out of the market and larger funds jump back into the market.
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