In yesterday’s commentary, it was noted that a cautiously bullish stance appears to still be warranted, however, a bearish alternative was also explained should the S&P 500 (FXCM: SPX500) make a lower high. A ‘head-and-shoulders’ top is in the works, with Thursday’s price action acting as a potential right shoulder to the pattern.

The timing of the formation lines up with other market forces. September is the worst performing month of the year for stocks, and as such anything which corroborates this seasonal bias is something worth sitting up and paying attention to.

But to reiterate from yesterday, a break of the neckline and a lower low below 2156 is needed to confirm the pattern; so we aren’t there yet. An upward channel since the mid-July chop-fest began continues to keep the market pointed higher, for now.

(Click on image to enlarge)

The clock is ticking. If the market is to roll over, we should see a confirmation break in the next week or so. If support holds, then so does any bearish bias.

One other note worth mentioning, since it’s been awhile since discussing, is that in recent years when the market made a new record high it had a propensity to punish those who bought the breakout within days to a couple of months later.