NEW YORK (TheGoldAndOilGuy.com) -- The past two years we've seen the stock market steadily climb with low volatility. All investors and traders have had to do was simply buy the pullbacks within the stock market and ride the market to new highs. While this has worked out very well to date, most will be in for a big surprise when the market trend reverses.
As of today, my algorithmic trading system -- which uses momentum, cycles and volume flows -- has signaled the market is now in a downtrend.
My strategy identifies intermediate trends within the market. These trends typically last three to 12 week, meaning the U.S. stock market is in for a wild ride.
The big question is if this is just another correction within the bull market or the start of something much larger.
What appears to be forming, in my opinion, is a major topping phase in the Russell 2000 index. If this is the case we will see a spike in fear that sends to the VIX, also known as the fear index or the volatility index, surging into the 30s and possibly even 40s, similar to what we saw in 2011.
The intermediate top that took place in the Russell 2000 index in 2011 is the same topping pattern we have today. This pattern led to a 30% drop in the index within a few weeks. The question is whether this marks the start of an actual bear market.