Picture This

"Every picture tells a story." - Proverb

Looking at tea leaves you can apparently predict the future.  I am not sure that I will ever believe that but the charts below seem to indicate that the future for the market is tough sledding ahead.

The first chart shows the S&P 500 chart for the past twelve months.  As you can see the index was stuck in a trading range for most of the year before falling to the support line around 185.  It bounced there but could not break above the resistance at 900 and appears to be under duress at present. 

Before drawing conclusions it is always good to take a look at what some consider to be the market's leading indicator and that is the Russell 2000.  This index is made up of 2000 smaller companies that make up a broader market and also tend to lead the charge on both the up and downside.  The reason being that smaller companies benefit from and feel the pain of positive and negative market impacts far earlier than the larger companies.  Taking a look at this index and one can see that the lows of 2014 have still not been reached.  In fact this index is holding up better than the S&P 500 at present but that said it also looks weak and if the lows of 1050 are broken it could signal a very poor market ahead.

The final index that I want to look at today is the Dow Transportation Index.  There has never been a period of new market highs without the transports recovering and settling into a long run bull market.  The reason for this is that transports are the pipes of the economy that funnel growth.  If these pipes are crammed full then things should be going well and if not watch out below.  It is clear, looking at this chart that the transports are signalling more weakness.  Not only are they in a prolonged downward trend but they have clearly breached the 2014 lows and are not showing any clear signs of a recovery.

So while the Federal Reserve once again begins its jawboning about raising interest rates it is clear that the market is uneasy and while we may have just entered a correction it is certainly looking like some more pain lies ahead and I would not view this as a buying opportunity.