Good morning folks, the week ahead could be key for our forecasts for weaker stocks, EUR/USD and other risk related currencies. Up until now, we have stalked this scenario but were held back time and time again. Our initiation of a short in EUR/USD on Friday is indicative of our belief that the push lower is now here.

S&P 500: the wave structure continues to suggest a break lower, but the annoying sideways chop which makes marginal highs each day before giving them back keeps traders on their toes. There can be little doubt that beyond the wave count, the move is not only tired but lagging when viewed against various indicators"

- The A/D Ratio (advance/decline) continues to push lower. The April, June and July highs (price) saw similar readings in the A/D Ratio, perhaps this scenario will play out again.

- The percentage of bears (roughly 28% currently) is at levels seen back at the peaks in May 2008 and late 2007

- Other markets: there is widespread optimism not just in stocks but also gold, silver, yen (prior to this weeks intervention) and various soft commodities. While it is certainly possible that this lopsided optimism is correct, when you overlay that historically AND add in the wave structure of the S&P 500, you cannot help but be a bit wary and as a result, aware that a more robust and unforeseen (to the majority) move to the downside has far better risk/reward.

- Bonds: this is the wild card and potential wrinkle with our current analysis. Bond yields appear on the verge of breaking above key resistance at 2.82%, if that takes place and is sustained, that would drive what many would consider overvalued bond prices lower. This happens to be our forecast. However, lower bond prices and lower stocks do not go hand in hand, at least for the last 2-years. Correlations can and do change, the question is whether or not we are on the verge of seeing a new dynamic: weak stocks and weak bonds.

Let's take a look at a few charts, most have not changed much from the ones posted last week, but it never hurts to review:

DXC 240-min chart

EUR/USD 60-min chart

EUR/AUD 60-min chart

Technical Bullet Points:

- AUD/USD: a break below .9330/37 should get some bearish momentum going.

- EUR/NOK appears to be in the process of pushing higher in Wave C, drilling down to the 60-min chart I can count 5-waves off the lows from last week and would be inclined to buy pull-backs into the 7.9330/7.9140 area and/or a break above 8.0000

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