Charting and technical analysis is not about making a sure call. It is merely a statistical study of features that have taken place in past and then relating them to the present time. In essence, it is a way of increasing the odds of the coin flip. Investing and trading is merely a gamble, but an educated gamble at that. The chart helps us increase our odds on the trade. The Ten Year Yield has a correlation with the S&P500. The correlation is this, a yield that trends upwards is negative for the S&P500 and a yield that trends downwards is positive for the S&P500. Now forget about the actual yield, it is the trend that matters the most. From 1963 to 1983, the ten year yield made its way ever higher finally reaching over 14%. During that time, the S&P500 chopped and based lacking a direction. From 1983 onwards, the yield trended down and the S&P500 exploded upwards. At the current time, the same correlation seems to hold true. The market is still very interest rate sensitive. In fact, the markets did not start trending up in 2006 until the ten year yield began trending downwards in July. The current ten year yield chart has become troubling. It appears there was a basing action for two years (2004 to 2005) and then it rode up to 5.24 to pull back for another short basing period and now is on another parabolic run. This run is a true breakout similiar to the breakout you saw in RIMM last year or any other type of equity that experiences a breakout after basing. There are a few formations here where we can estimate the target price of the ten year yield. I think its a valid assumption that if the ten year yield were to start trending down then the S&P500 will show strength. So we need to find where the end of the rise will be. If we were to conclude that the ten year yield is in a large symetrical triangle as my chart suggests, then the target yield becomes: - 5.245-3.983= 1.262+4.75= 6.012 If we were to assume, that the yield will form into a cup and break out over the top then the target will be: - 5.245-4.404= 0.841+5.245= 6.086 The most obvious scenarios for the future of the yield are the following: 1) The yield marches up to 5.245 and then turns right around after hitting resistance. (I dont see this as likely) 2) The yield marches up to 6.012 and then turns around after hitting this pivot point (most likely) 3) The yield marches up past 6.012 and goes for 6.8 thus completing a large 7 year cup in the yield price. From there it could break out even higher to 9 completing a larger cup that started forming in 1995. There are quite a few scenarios, but history suggests that when the yield turns upward then pressure is placed upon the S&P500. There are many possible outcomes, however, I believe this yield will go higher then 5.24 and hit 6.00 soo enough. A larger outbreak might follow however testing other resistance lines. If you think about it, the ten year went from 14 to 3.8. A retracement of at least 50% of that height is likely, but may take several years to form. Think about what the analysts with all these MBAs have been saying to the investment public. They have said to choose large cap high yield dividend stocks. The reason being is that the ten year yield supercycle was highly recognizable. In a rising yield environment, the only stocks that will take the least of a beating is the large cap high yield stocks. The rest of them will be decimated. So with that said, I'd like to move on to what I see as the possible outcomes in the indexes.