Since the end of October, we have seen two very quick pullbacks in the S&P 500, as price volatility began to pickup. From mid-August until the end of October, prices were very stable as they rose in a very narrow channel. Intermediate-term market tops are many times preceded by very jagged price action as supply and demand start to even out. In addition, there has been a negative momentum divergence on the daily charts, and this is often a sign that a pullback/correction is coming.

Bond yields on the 10-year Treasury are trying to bottom out near the 4.5% area, in our view. There is major, long-term trend-line resistance just below the 4.5% level. In addition, Treasuries are oversold on both a daily and weekly basis. We will need to see a reversal back above the 4.8% level to confirm that a bottom is in.

Crude oil has rallied back to the $62 per barrel area and we believe prices are close to breaking out after drifting sideways for the last two months. There have been multiple positive divergences on the daily chart over the last two months and the weekly momentum indicators are finally starting to turn higher. A break above the $63 level would complete an intermediate-term reversal pattern, and confirm that prices have finally bottomed.