The Chart Everyone is Talking About

Although we truly dislike to present charts, especially those filled with trendlines and technical indicators, today we could not resist not to show the chart everyone is talking about. It appears that from a technical standpoint, the DOW and S&P500 but not the Nasdaq, might have consummated a complex "Head and Shoulders" Top. We refer to this H&S Top as complex because it actually appears to have 2 right and left shoulders. Today´s resolute break below the trendline which appears in the graph below would truly represents a "go-short" confirmation for those defensive investors who would rather wait for this type of events. However, lets not forget that from the 950 level of the S&P500 which we said here probably represented the TOP, to today´s close at 881, this fall already amounts to a 7% correction. Volatility on the other hand and as we wrote on our last post is indeed having the necessary consistent follow-through at least up to now to make this fall amount to something more than a lateral movement. Today the VIX rose more than 6% regaining the 30 psychological level. The next critical resistance level is 34.57, but there will be more bleeding before markets retest this level.

The question now is whether we will see this happen this week or instead, markets could bounce back a little in an endless attempt to catch people off guard.