The neckline of the Head & Shoulders formation appears to have been crossed. That action activates the formation with a minimum target of 2044.43. Chances of a bounce back above the neckline are normally slim to none. Should we close beneath it, we may see a massive gap down tomorrow.

You can see that we have also crossed the lower trendline of the Orthodox Broadening Top. The lack of a bounce at that line means this is serious business. In additiion, the 2-hour Cycle Bottom is turning down and may provide no support at all.

The daily chart shows some support at 2100.00, despite the low at 2119.12 on September 12. The futures bottomed at 2107.00 just prior to the open that day. This level has acted as either support or resistance multiple times over the last year. However, the H&S target is the closing price for 2015 at 2043.94. I expect Wave 1 of (C) to find its low at or below that level.

If a panic were to develop, the bottom of Wave 1 could be as low as the Cycle Bottom at 1891.80. So far, this is all guesswork until we see the decline develop more.

One of the unanswered questions is whether to use the smaller Orthodox Broadening Top or the larger one. That question may be answered in the next few days.

Regards,

Tony

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Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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