Stock Market Gears Up for What Could Be One of the Most Critical Weeks of the Year

investing.com:

It’s a significant week for the markets, as a plethora of economic data is poised to determine the trajectory for the upcoming month. Yields have demonstrated a steady advance, the US dollar has exhibited strength, and equities have undergone a downturn. Notably, the S&P 500 is currently displaying a series of cautionary signals.

This was further underscored by the emergence of another bearish engulfing pattern this past Thursday. Moreover, the accompanying chart illustrates that the S&P 500 encountered difficulties in surpassing the 50-day moving average and sustaining a position above the 10-day exponential moving average.

These three factors, in isolation, already indicate a bearish sentiment. However, the situation is compounded by the emergence and validation of a bump-and-run reversal pattern on the S&P 500 chart. This particular pattern, recognized for its bearish implications, has breached both preceding uptrends.

Furthermore, an emerging head and shoulders pattern is discernible within the index, featuring a neckline approximately at the 4,330 mark. Should both of these patterns unfold as anticipated, there’s a conceivable scenario wherein the index might experience a descent to around 4,200 initially, with the potential for a more extensive drop to as low as 3,800. This retracement could essentially retrace back to the origin of the initial bump and run pattern.

Furthermore, the hourly chart of S&P 500 Futures reveals a megaphone pattern that has already experienced a downside break. This implies the presence of additional room for decline, indicating the possibility for the futures contracts to descend further, potentially reaching approximately 4,250.

Similar characteristics are observable in the QQQ as well.