Markers suggest a pullback could come - and if history repeats itself markets could fall 27%. Citi says 10%

– Beneath the surface the risk indicators are suggesting things could turn ugly. US government bond yields moved up to 4.2%, a 3-month high, while the US dollar index  marched up, and oil prices extended their run, gaining 4% in two days. And the technical indicators for the S&P500 $S&P 500 Index (.SPX.US)$ suggesting markets are overbought. But if you just note this, the last time bond yields were this high over the last three years. And we had similar patterns forming in the S&P500 $S&P 500 Index (.SPX.US)$ index, then we saw markets fell about 27% on average. But Not always. But do note, investment banks Citi started to warning clients to maybe expect a 10% fall.

– So will a sell off occur? Well it might not happen, with tech companies report earnings over the coming weeks  - Maybe Apple $Apple International (2788.JP)$, Microsoft $Microsoft (MSFT.US)$ and Nvidia’s $NVIDIA (NVDA.US)$ earnings could save the day. But we have to pay attention. And remember that when markets fall, we see investors buying the dip. And this time, dips might be bought more as the US and China are cutting interest rates and company earnings are growing. And remember, markets don’t go up in a straight line. The S&P500 has always recovered from a crash as Investment managers do most of their buying when markets fall.

– While Investors are also buying China-facing stocks, like Lululemon $Lululemon Athletica (LULU.US)$ up 2.5% in two days, along with Royal Caribbean $Royal Caribbean (RCL.US)$ cruises tipped to benefit from US and China’s fresh rate cuts.

– Look for gains in commodity stocks such as gold  - with WestGold Resources $Westgold Resources Ltd (WGX.AU)$ up 26% in five days. Regis Resources $Regis Resources Ltd (RRL.AU)$ up 15 and Evolution $Evolution Mining Ltd (EVN.AU)$ up 11% with West African Resources $West African Resources Ltd (WAF.AU)$ up 11% in five days