Goldman Sachs: S&P to 865 If Neckline Breaks

The stock market has its own idea of the so-called "recovery" touted by Obama, and it is tanking.

TA (technical analysis)-speaking, the battle line is right now the so-called "neckline" in the "head and shoulders" pattern at 1040 for S&P 500 Index. If that breaks, next stop may be mid 800s. (Calculation: 1040 (neckline) minus 180 (head minus neckline) equals 860)

According to Zero Hedge, that's what the analysts and traders at Liberty 33 (where representatives from the Vampire Squid trade) are worried about:

Cold Shoulder: Goldman Warns If 1,040 Is Taken Out In S&P, 865 Is Next Stop (Tyler Durden, 6/29/2010 Zero Hedge)

Here is why the entire Liberty 33 trading desk is set on preventing a break of 1,040 in the S&P - as Goldman's trading desk technician John Noyce warns, the next stop in the head and shoulders formation, should 1040 be taken out, would be 865, not to mention a complete rout for global teleprompter stocks post the mid-term elections.

• The S&P fails to sustain above the 200-dma with a clear risk of an H&S top forming…
• Early last week the market moved above the 200-dma which argued for some ST stabilisation and the chances of a deeper retrace of the drop from the April highs.
• The break however failed to yield any meaningful rally and the market has now moved back below the 200-dma on a close basis.
• As discussed over recent weeks the underlying structure of the market has a negative setup and you can now also argue an H&S top is in the process of forming.
• The interim low from 8th June and the neckline of that pattern are now converged; 1,042-1,040. This region
  also represents the first notable support below current levels.
• If a break below the neckline of the pattern can be achieved as looks the risk on a multi-week basis the target would be 865.
• Overall, the market structurally looks a sell on rallies with the MT-LT (multi-week/-month) risks on the downside.

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