For months we have been calling it a “Dome” on SPX’s head. Now that markets are getting interesting and since I prefer to be colorful when markets allow, this highly technical pattern was dubbed a “Dunce Cap” last week in NFTRH 376. Below is the latest status on the monthly chart.

If people think they’ve seen a crash already, they need to think again. This is nothing more than a topping pattern at this point. A crash could be activated with a drop below the neckline.

Meanwhile, rightly or wrongly I am expecting a temporary bottom at or above that line. As such, and considering the SOX pinged our initial target today, I covered 2 of 3 Semi Equipment shorts today. Considering a chart-based momentum entity that was bullish the Semi’s and the whole market not 2 weeks ago started shorting today, I thought it further reason to cover. I kept light short exposure vs. the EM’s to go with the one Semi short.

I don’t want to sound like a bear hero. I am not the best bear around ever, let alone when I don’t have confirming signals. So I only broke even this week as shorts were protecting a few longs. But one thing did happen with today’s brutal close; an intermediate bear phase was confirmed and very important resistance was established where shorts can be increased on a bounce and higher reliability swing trading can be established going forward.

If on the other hand the neckline fails, the process could unfold on a faster time frame, 2008-style. I don’t think that is in play, but…

Have a nice weekend folks.