Equity markets fell hard on Monday to not only confirm resistance at the S&P 500 level of 4,300 but to break through potential support at the 4,150 level as well. The move also confirms a much larger Head & Shoulders pattern that has been in play all year. This pattern has not only a long-term but a deep implication that could lead the S&P 500 down to the 2,700 level and keep it trending at low levels for an extended period of time. The major culprit for the move is slowing economic activity and the possibility of a deepening recession.

This week, the biggest risk for the market will come on Friday with the release of the PCE Price Index. The index is expected to show a slowdown in the monthly advance of consumer level inflation but for core consumer inflation to remain at record levels on a YOY basis. A better-than-expected figure could send the market higher but a worse-than-expected number will most defiantly send it lower on an increased expectation for another aggressive FOMC interest rate increase.