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The Dow 30 and the Russell 2000 have both broken the lower boundary line of the rising wedge/uptrend from the Oct 2011 lows. The market rose today forming a swing low and a partial back test of the trendline. Most wedge pattern breaks that I have ever seen are followed by a back test of the lower boundary, many times even with a close back above the lower trendline. I am not saying that will happen here, but on individual stocks, it very often does.
What I would suggest here is that any swing low, such as today and yesterday, that forms below the lower trendline, sets the stage for an accelerated decline on a decline below it. So if the market move below Tuesday's low, the likelihood of cascading declines increases.
The SPX and the NYSE have not broken he corresponding trend lines yet, so maybe the market has a little more downside chop to do before accelerating down.
As the middle of this week passes, a key time relation for several markets to change trends is passing which I believe increases the odds that gold, silver, the Euro, and stocks may have established significant highs and be set for substantial declines.
Currently the double top chart pattern on the SPX and DJX is nearly ideal and would imply major losses in the months ahead. The key components of a double top are a well established prior trend, a lower volume second top versus the first, and ideally the second top should slightly exceed the first, which functions to run buy-stops before the major reversal occurs. All of those factors are present in the current case. It would take a break of the Oct 2011 low to confirm the double top, but while that may seem an already large decline, it would imply another 300 S&P 500 points to the downside below the Oct 2011 according to the standard measuring projection. That would place the S&P 500 in the 700's if the textbook double top pattern and target are met.
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