New Chart in Focus: The accompanying chart debuts as our new 'Chart In Focus' today.

So it looks like the markets have broken their 20dMAs (to the downside) today and that should mean that a bearish phase may be taking shape on the minor trend, shouldn't it?

Well, we've been pointing to the possibility of a market top for the past couple of weeks - several potential sell signals have been highlighted on the daily and weekly charts - and today's break seemingly confirms those sell signals. While the onus is now certainly on the bulls to prove that they're still in the game, the Bollinger Bands, which have undergone extreme contraction over the past couple of weeks, are providing the bulls with a small chance to yank things back in their favour.

S&P-500 Large Caps Bollinger Band Contraction

Take a look at what has happened over the past couple of weeks on the daily charts of SPX, INDU and NDX. The narrow trading range on each of the indices has caused bollinger band width to decrease sharply; in other words, there has been a tight contraction in the bands.

Furthermore, given that the price consolidation has been near the recent highs, which had first been reached when the indices were near their upper bands, the lower bands have risen far more sharply than the upper bands have fallen. In fact, since the upper bands had risen to a level a couple of percentage points above price action around two-three weeks ago, their descent over the past week or two has only brought them down to the level of the recent highs.

The lower bollinger bands, however, have risen sharply - 6-8 percentage points or so - in each case. So, in a most interesting twist, despite the fact that the 20dMAs have been broken to the downside today, the indices found themselves not far from their lower bollinger bands at the intraday lows so far.

So what does that mean? Well, bollinger band theory states that if the lower band is flat or rising, there is the possibility, even the likelihood that support will be found from the band. As it turns out, the lower band on each of the indices above is flat as of today. That in and of itself may not necessarily mean that the apparent sell confirmation signal generated by the breaking of the 20dMA in each case, is dead on arrival, but it does warrant paying very close attention to the lower band over the coming two or three sessions.

In a nutshell, the lower bollinger band needs to actually start curving outwards (falling) right away. If that does not happen, there will be the possibility, even the likelihood, that support will be found from the band and a rebound take place. So we'll be keeping an eye on the bands over the next few days and will update this chart until there is a resolution to the highlighted development.