Good morning folks - I trust the weekend was enjoyable.

In case you did not notice, the last few days have held a lot of potential, i.e. reversal lower in the S&P 500 and EUR/USD, but as of Friday's close, we were still waiting. Friday's NYSE volume of 747 million shares traded makes it the slowest day of the year and that includes holiday-shortened trading days. The result, prices have been chopping around, with the S&P's up-and-down stabs forming a potential wedge, similar to the larger wedge that unfolded into the August 9 high.

S&P 500 - 60 min chart

It is interesting to note that the S&P made a new recovery high 1110.88, which was not confirmed by the DJIA or the NASDAQ, so one could make the case that the rise is complete. Prices would need to come under 10,332.40 (DJIA) and 1091.15 (S&P) in order raise the odds that a near-term trend reversal had occurred.

One development worth noting though is the recent pick-up in 10-year Treasury yields, breaking above the downward sloping trend-channel that began back on April 5th. This bears watching simply because of the tight correlation between yields and equity prices. If the pick-up in yields continues will that drag equities along with them? A key question that does not have an obvious answer at this juncture.

10-year yields

The one relationship that remains solid is that between the Dollar Index (DXC) and EUR/USD - this should come as no surprise as the correlation between these 2 is always robust. The Dollar Index is composed of 57% euros so this tight relationship makes sense.

While price action in EUR/USD has been choppy in recent sessions, the wave structure suggests the beginning of Wave 3 lower in about to get underway.

EUR/USD 60-min chart

So, the week ahead is pivotal, we will either see a sharp push lower in the S&P's and EUR/USD or the wave count/forecast is incorrect - diligence and patience will be required.

For more from Dave, visit Aspen Trading for more updates.