As predicted yesterday, stocks broke down hard. Recall that we observed that the breakout from the inverse head and shoulders pattern in the S&P 500 was looking extremely weak. This is usually a very bad sign and portends a dramatic failure. Indeed, we note only rejected current levels but completely retraced the entire pattern, currently finding support at 3887, the head of the pattern. We can expect support here, but if it does not hold, we are set to make new relative lows which is a very ominious sign. The neckline at 4068 is likely to be a prohibitive upper bound for some time, as is usually the case with failed H&S patterns.
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