The breakdown in the retail sector is a very negative development. Retail sales account for about 70% of GDP, so even one very negative day can have an impact on the broader market.

Regular readers know that I caution against predicting a pattern's development, especially one with a big market impact like a head-and-shoulders top, before all of its elements are in place. However, it appears this formation is developing on the S&P 500 with the index just over 6 points away from a breakdown at 2,040.

If the pattern's target of 1,969 is hit, we could see a test of the January/February lows at about 1,810

The market is telling us to be cautious.