Every technical analyst in the world is poring over their charts and coming to the same conclusion. A “Head and Shoulders” pattern is setting up for the major indexes, especially for the S&P 500 (SPY).

This is terrible news for the stock investors, as well as other owners of risk assets like the US dollar, commodities, and real estate. It is wonderful news for those long of Treasury bonds (TLT), the Euro (FXE), gold (GLD), and silver (SLV).

A head and shoulders pattern is one of the most negative textbook indicators out there for financial markets. It means that there is only enough cash coming in to take prices up to the left shoulder, but no higher.

There is not even enough to challenge the old high, taking a double top decidedly off the table.

The bottom line: the market has run out of buyers. Be very careful of markets where everyone is bullish long term, but no one is doing any buying.

When the hot, fast money players see momentum rapidly fading, they pick up their marbles and go home. Some of the most aggressive, like me, even flip to the short side and make money in the falling market.

If we make it down to the “neckline” and it doesn’t hold, then the sushi really hits the fan. Right now, that is at $185 in the S&P 500 (SPY).

Stop losses get triggered, the machines takeover, and shares move to the downside with a turbocharger. Distress margin calls on the most levered players (usually the youngest ones) add further fuel to the fire. We might even get a flash crash.

This is when the really big money is made on the short side.

There is a new wrinkle this year that could make this sell off particularly vicious. To see a formation like this setting up during a seasonally strong time of the year is particularly ominous.

It’s not like we have any shortage of bearish headlines to prompt a stampede by the bears.

The turmoil in Europe could cause the US to catch a cold, one of the largest buyers of American exports. This is what the latest round of earnings disappointments has been hinting at.