Copper Prices Signaling a Top in the S&P 500

NEW YORK ( TheGoldAndOilGuy.com) -- The past five to six weeks have seen equity prices move considerably higher amid growing concerns regarding the European debt crisis, the instability of the Middle East, and ultimately the potential for a major economic slowdown in the United States.

U.S. equity indexes have continued to climb the proverbial "Wall of Worry" since the first week of June and have put on an incredible run. This past Friday saw the S&P 500 post the highest weekly close of 2012. The perma-bears have been calling for a top and continue to run scared as light volume and volatility have given the bulls an edge during August.

The next key overhead resistance level for the S&P 500 to hurdle is the 1,440 resistance zone lingering slightly overhead. I try to refrain from calling tops or bottoms as I feel its a fool's game that ultimately humbles most market prognosticators. If calling tops and bottoms was easy, investors and traders alike would be able to produce monster gains all the time with uncanny precision.

Instead of trying to predict where the S&P 500 Index will find resistance or create an intermediate to longer-term top, I will simply posit some technical and macro-economic data that indicates we are likely closing in on a major top.

As stated above, the recent rally we have seen has taken place on relatively light volume and plunging volatility as measured by the Volatility Index, or VIX.

As can be seen above, Friday's weekly close for the VIX was the lowest in 2012 and ultimately one of the lowest closing price levels in several years. While the VIX is trading at a major intermediate low, there remains a lower support level going back to late 2006 and the early part of 2007 around the 10 price level.

The perma-bulls would argue that we could see those 2006-2007 lows tested, but based on September monthly VIX options the option market seemingly is arguing that we are approaching an intermediate low in the Volatility Index. The chart below illustrates the September VIX option chain based on Friday's closing prices.

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