It's been almost half a year since the last bearish setup formed — the market structure that must be present to even have a chance of a larger and faster move lower. It last made an appearance in September preceding the vertical drop of almost 10% on the S&P 500 in less than a month. In the blink of an eye, however, the markets pulled off a sheer cliff climb straight back up to eclipse the previous highs on most indexes. To a sleepy-eyed investor, it must have seemed like a dream. To those with a shorter-term focus it was a bit more like a nightmare. Well, the setup is here again, and this time the extenuating circumstances are increasingly negative, but does that portend a different outcome? Even if these markets perform another cliff dive will they have a bungee cord attached again leading to yet another snap-back higher rally? To answer the first question, to get a larger fast move lower you must first have the market structure in place to support it and once more, that is now in effect as I have discussed last week in broadcast and writings elsewhere. I'm speaking, of course, about the potential for multiple swing-point breaks on multiple timeframes as shown here on the S&P 500. But will the setup trigger? Are there any technical indications to suggest it is more likely now? If we dig a little deeper, there is an inkling of evidence to support this notion and preponderance of possibilities that more evidence is soon to come. If we consider that the largest sectors comprising the S&P 500 are the financials,technology, industrial and health-care sectors, all but the latter are set up similarly to the indexes, with the financials already breaking lower as seen here on the daily and weekly time frames. The significance on the weekly timeframe is that buyers failed to step in where they should have to defend the breakout swing point’s low (retest-and-regenerate sequence) which now creates the possibility of a lot more price depreciation. If breaks of the swing-point lows occur in technology and the industrial sector as well this week, then the probabilities that the indexes follow increases dramatically. Thus, with pressure building for another faster move lower, the question shifts to whether another bungee-boogie dance back higher can unfold again once the drop has occurred. This question leads us to ponder the fundamental side of the equation and, in particular, the central bankers. As we all know, they still hold the golden key, and any hint of weakness in equity markets has brought them rushing to their aide time and again over the past five years. In fact, they are already busy at work in Europe where the unleashing of quantitative easing has buoyed their markets to the tune of a 7% jump in January alone. Monetary debasement works for Europe, yet isn't that part of the problem? If the euro depreciates, it pressures the dollar higher and higher, and that leads a fundamental problem for large multinational corporations — it hurts their profits. That's what we have seen over and over again this quarter with earnings failing to match expectations for the first time since 2011. Which brings us back to the central bankers. With the Federal Reserve failing to take a more dovish tone last week despite the market clearly wanting it, Fed speakers are scheduled to espouse their enlightenment all week long with appearances four of the five days. Will they take a dovish tone and talk the dollar down? Right now with earnings floundering and economic reports continuing to depress the market, that's really the market's only hope to prevent a faster break lower. Just this past weekend China printed a contracting PMI number. Economically things are worse now than in October of last year. Economic reports have steadily trended lower for the past five to six months. Given the current setup, the odds of a faster move down are high again, and the fundamental data is not in favor of higher prices either. That leaves the central bankers to come to the rescue, and I fully expect they will. Don't be surprised if we get another bungee bounce back up if we indeed do fall, and that is where the larger test will occur for the longer-term timeframes. If we are topping we are in the early stages, but it is very premature to think this is a top yet as we have yet to even get a failed bounce. For that to happen, there has to be larger losses to begin with and that we are waiting to witness. The aging greybeard of a market continues to show wear and tear, and prudence is required again. marketwatch