Editor's note: Following is an edited version of commentary Ken Goldberg sent to readers of his WaveBOOM subscription email newsletter Tuesday night.
NEW YORK (TheStreet) -- There is big debate right now about whether the major stock indices have reached a peak, as the Federal Reserve is now posturing that it will raise interest rates.
However, the market began raising the yield on the 10-year Treasury note in July 2012, from its all-time low near 1.39%. It also raised the yield on the 30-year Treasury bond from its all-time low near 1.65% this past January, after 34 years of decline. (See the chart below.)
Therefore, a stock market peak and reversal should not be blamed on upcoming Federal Open Market Committee actions. Rather, such a reversal in stocks should be blamed on the market's realization that the Fed has lost control of interest rates and is catching up to the crowd's belief about reality: a higher interest rate environment.
Tuesday, right on the target date of the major Bradley Model market turn date, stock indices opened lower, then reversed higher, closing well off their lows.
So, either a short-term low is being manifested, or, since major Bradley Model turn dates have a margin of error of plus or minus two days, there is still a major reversal coming, which could be from a lower high occurring later this week on the back of the bounce that began Tuesday.
Evidence of at least a multiday bounce comes from a short-term buy signal on the S&P 500 that appeared at the close Tuesday on the Chicago Board Options Exchange Market Volatility Index, or VIX, a widely used measure of stock market volatility. The VIX closed back within the upper Bollinger Band. The other two times this occurred this year, rallies followed.
Also, the McClellan Oscillator closed Tuesday at -188, which is in the vicinity of oversold extremes that should be harbingers of market lows, at least temporary ones, in the next couple of days.
The McClellan Oscillator measures the direction of money flowing into or out of the market, on a net basis. At -188, money is flowing out of the market at an unsustainable rate. As that outflow wanes, a bounce in stocks follows.
Daily stochastics on all indices, except the Russell 2000, are at oversold extremes, as well. Therefore, those with profitable shorts are urged to protect them with trailing stops, or simply close them out for now.
If stocks have one more new high left in them, 18,500 on the Dow and 2150 on the S&P 500 are ideal for termination targets. New highs are not required, however, and current divergences are historic.