The S&P 500 broke the triangle to the downside today, which we knew was a possibility and is exactly why we have been so lightly allocated to equities.
While this breaking of the triangle is a bearish event, there still needs to be some follow through to the downside in order to confirm the pattern. It would be of no surprise to me if we see a rally Tuesday back to the bottom line of the triangle which just happens to come in at the pivot point 1453.67, before the decline really gets going. If this comes to be the case then it will allow a further reduction in equity exposure as I will be trying to get down to the 15% invested level.
The downside target for the triangle is 1340, which is quite a sizable move.
If this break does confirm then I will be purchasing some put options to protect the Long Term Equity Portfolio.
Now, while this action today is of bearish consequence, it does not take away from the long term viability of this bull market. It merely should prolong the correction that has been in force now since June 2007, but I will be putting safeguards in place just in case this correction decides to become something more.
There still are some things that need to come together to confirm this short term down leg, but it would be prudent to prepare for such an event.