"The possibility of a severe fall in the stock market is now very high," warn technical analysts at HSBC, who have dialed up the bank's outlook for U.S. stock markets to "red alert" following an aggressive wave of selling. The warning heightens the note of caution in HSBC's tone from a September 30 report in which the bank issued a lower rated "orange alert", pointing to similarities between Dow Jones Index trading patterns seen just prior to the 1987 "Black Monday" stock market crash and now. HSBC contends the "head and shoulders" shape - a visual representation of price trends which are seen to signify the approach of a market top – is currently in evidence for the industrials-focused index, saying the pattern has recently been tested and re-tested.

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The report described Wednesday's sell-off as "broad-based" and as demonstrating "intense selling pressure", both factors in its decision to crank up the alert level. The note highlights 17,992 points for the Dow and 2,116 points for the S&P 500 as the critical pivot points to watch for signs of a broader capitulation. At Thursday's session open, the Dow fell more than 150 points and hit its lowest level since July. "As long as those levels remain intact, the bulls still have a slight hope. But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast," the note, authored by Murray Gunn, head of technical analysis, said Thursday.

While this bull market has often been called an unloved rally, characterized by a lack of conviction in the strength of its fundamentals and frequently said to be the outcome of an abnormal investing climate shaped by central bank tinkering, not everyone agrees the market has yet peaked. Speaking to CNBC on Wednesday, William Hobbs, head of investment strategy for the U.K. and Europe, sounded a note of caution about misreading signs. "People are mechanically now looking for reasons to turn negative. And for us actually that probably means there's opportunity still as we're not having a fair and balanced debate about the fundamentals of the market," he said. Along the same vein, Kleinwort Benson's Chief Investment Officer, Mouhammed Choukeir, rang a skeptical tone over the contention markets are now peaking. "Market tops are characterized by euphemism and euphoria and we're clearly not there. Valuations are potentially extended but from a sentiment standpoint this is not what you see at the top of the market. You usually see a surge in IPOs (initial public offerings), M&A (mergers and acquisitions), there's this optimism about the economy and the markets as a whole, earnings expectations are on the rise. That's not the environment we're in," he told CNBC Wednesday. And indeed, Choukeir interprets the lack of enthusiasm in many pockets of the investing world as a positive factor for those intending to stay in the game. "That's a cause actually for optimism as an investor to be contrarian and go against the mood. That's what we've been telling our clients, to stay with it," he added.