A Couple Targets on the S&P 500

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There could be a head and shoulders top forming and confirmed in the S&P now. In the clean patterns you will not see any closes back above the neckline, so that is something to watch for on this one.

In this case the decline from the head to the neckline is 180 pts. A decline of 180 pts down from 1040 which is the break of the neckline, would target 860 as the textbook minimum decline. If you use percentage decline rather than points decline, that would put it around 885.

Also, when looking at the decline of the first leg down, it was 13%. If the decline of the second leg is 1.618 (fibonacci ratio) of the first, then that would be 21%. Down from 1130, that would target 860 also.

There has not been much increase in the put/call ratio indicative of an imminent low as of yet on this decline. So, it is not unreasonable to expect to see some more pessimism before a lasting rebound.