The charts of the last few days and weeks are beginning to look like serious top formations. Are they not alarm bells indicating the end of the long secular bull market?        

Eoin Treacy's view

Thank you for a question I suspect many will be asking following a volatile week. We define 'secular' as very long term, so no I do not think that is over. However Wall Street has been rallying for six years. In the process it went from a deeply depressed level to post new all-time highs and then improved on that performance by extending the advance. That lengthy medium-term cyclical bull has lost uptrend consistency. 

Let's put it in context: the S&P 500 ranged between 2000 and 2013 before breaking out. Since the breakout we have not seen a reaction of more than 10%. At the time we described the sharp pullback in October 2014 as a shot across the bows and potentially a loss of consistency at the penultimate high as described at The Chart Seminar. This week's decline takes the S&P500 back into negative territory for the year and it is down more than 5% from the May peak. A short-term oversold condition is evident, so there is potential for a bounce, but a sustained move above the 200-day MA will be required to question the short-term downward bias. 

If we turn our attention to the long-term log chart, while traders are taken up by the minutiae of intraday ticks this pullback may be nothing more than a consolidation of an impressive breakout from a long-term base from the perspective of an investor. 

Among individual shares, those with the largest overextensions relative to their respective 200-day MAs, Netflix for example, all posted large downward dynamics this week to signal peaks of at least near¨Cterm significance.  

Meanwhile 10-year Treasury yields failed to hold the region of the 200-day MA and a clear upward dynamic would be required to question current scope for additional compression.