The question now is not whether risk is on the brink of a drop but rather how much of a drop?

The question now is not whether risk is on the brink of a drop but rather how much of a drop? My answer is simple and straightforward: 1661.22 for the Gold and 1369.33 for S&P500.

The end of the last week finished for the Gold (symbol: XAUUSD) with massive liquidation of longs and we have  a top confirmed by a Head and Shoulders pattern. If you look at my previous post "Is risk on the brink of a drop?" the picture is not much different now only that we are much lower now and the risk/reward is pretty much 1:1 if you wanna trade it on the daily chart. The RSI and Twiggs money flow continue to drift lower into negative territory, the 50day SMA provided no substantial support and it seems like the Gold futures market is headed for a meeting with one of the most common used indicators the traders use - the 200day SMA which in our case coincides with the 50% Fibonacci retracement taken from the lows at 1526.70 to the highs at 1795.75.

The S&P500's setup wasn't as easy to play last week as it was for the Gold. It seems that somebody was quite desperate to hold this market from falling all week - lots of large algos were bidding it in a desperate attempt to hold it until the elections. Will they succeed? I don't think so, the markets are bigger even than Bernanke and Obama, and no matter how much they're trying to manipulate it from the background once the king market decides to correct lower, nobody, and I mean nobody, can stop it from falling.
So what do we see on the technical picture here? Plenty of bearish signs - triple top, lower lows and lower highs, broken ascending channel, negative RSI divergence with last top topped at 60 (which is my upper bearish boundary), decreasing Twiggs Money Flow (below 0).
I'm sure I can find many other bearish signs in this market if I add more technical indicators but you got the point. Risk is going lower and it will be rather sooner than later. Think about it - crashes occur when nobody expects them and now everybody expects the stock market SPX, and risk trends in general, to remain strong until the elections, nobody is expecting them to crash now, so if a flash crash is about to occur now is the time, not after the elections when everybody expects it.