Chart of the day: S&P head and shoulders top

The US S&P500 fell over 2.5% last night – a harbinger of further falls. Today’s chart shows that a head and shoulders formation has been completed, with the neckline at 1250 points (the orange line) and below the 200 day moving average.

If the S&P500 closes the week below the neck line, the US stock market goes from “unicorns and rainbow” bull market to a bear market.

Here’s the weekly chart in context (h/t Avid Chartist who also has a good summary of the breakdown in world risk markets):

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  1. John Theodorou

    I wouldn’t be surprised to see a test of the trend line and some wild gyrations thereabouts first, especially as the US FED has another POMO day booked for Thursday, where they will be turning up with $3 billion in handouts.

    But once the fertilizer is absorbed, selling will then, no doubt, recommence. there must be a genuine excuse, real panic, for another bailout programme to be enacted and the S&P at 1250 is way probably too high for this.

    • 10:15 Thursday morning NY time, POMO activity lasts till 11:00, should be good for a 100 point bounce…

      • John Theodorou

        And the Fed/Treasury will want you to short ( restrictions on short selling), once the signal is in (another close below 1250, perhaps after a retest of the trend line/), otherwise there will be no excuse for another bailout. Although a fat lot of good another bailout will do.

        But first, the blood bath – is it too audacious to suppose another test of the 2009 low at 666? Things will be plenty deflationary by then.