Following the June 19, 2010 article titled "Signs of concern in the recovery process", additional bearish signals continue to develop. The Chicago Options Volatility Index or VIX, which is a measure of risk on the S&P 500, posted a level of 29.74 today. Historically this elevated range only occurs at the crests of bull markets and during bear declines. During the calmer bull market phase, the VIX remains below a reading of 18. This heightened level of almost 30 strongly suggests greater volatility and risk in the markets over the next few months.

Other market signs of investor concerns are displayed in:

1) The steady rise in safe haven currencies such as the Japanese Yen and US Dollar.

2) The US yield curve continues to steepen. During a typical economic recovery, the yield curve begins to flatten within the first year.

3) Bond demand remains brisk. This asst class is associated with a defensive stance.

4) Gold, the 'flight to safety' metal has been moving to new highs on increased demand.

5) European stock indexes struggle to advance in spite of the completion of the April to May 'flash crash' correction.

Model continue to indicate that the completion of the current 4-month trading cycle in the S&P 500 and the next major low is in September.

More research will be in the upcoming July newsletter.

Your comments are always welcomed.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2010 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present. He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms. He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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