Here is why the entire Liberty 33 trading desk is set on preventing a break of 1,040 in the S&P - as Goldman's trading desk technician John Noyce warns, the next stop in the head and shoulders formation, should 1040 be taken out, would be 865, not to mention a complete rout for global teleprompter stocks post the mid-term elections.
- The S&P fails to sustain above the 200-dma with a clear risk of an H&S top forming…
- Early last week the market moved above the 200-dma which argued for some ST stabilisation and the chances of a deeper retrace of the drop from the April highs.
- The break however failed to yield any meaningful rally and the market has now moved back below the 200-dma on a close basis.
- As discussed over recent weeks the underlying structure of the market has a negative setup and you can now also argue an H&S top is in the process of forming.
- The interim low from 8th June and the neckline of that pattern are now converged; 1,042-1,040. This region
also represents the first notable support below current levels.
- If a break below the neckline of the pattern can be achieved as looks the risk on a multi-week basis the target would be 865.
- Overall, the market structurally looks a sell on rallies with the MT-LT (multi-week/-month) risks on the downside.