Are US stocks due for a major sell-off soon?
It is best to watch this reversal pattern forming on the four-hour chart of the S&P 500.
S&P 500 (SP500) 4-hour chart Chart by TradingView
U.S. stock markets appear to still be feeling the brunt of the tech sector sell-off, as investors remain skeptical about the sustainability of AI-led rallies.
It doesn’t help that the latest round of earnings reports has been disappointing, with big companies like Amazon missing revenue expectations and Intel announcing workforce cuts.
As such, the S&P 500 suffered a sharp sell-off in the last trading session, leading it to drop to the neckline of the head and shoulders pattern on the 4-hour chart.
Could it drop soon?
Remember that directional biases and volatility in market prices are usually driven by fundamental factors. If you haven’t done your homework on US stocks yet, it’s time to check out the economic calendar and stay up to date with daily fundamental news!
Continued selling pressure could lead to a breakdown and downtrend at the same height as the chart pattern, which could lead the stock index to the next area of interest at S3 (5,181.70) or lower.
The 100 SMA is above the 200 SMA at the moment, but the gap between the moving averages has narrowed enough to indicate a possible bearish crossover. At the same time, the index is trading below both indicators, so they may remain dynamic resistance levels from here.
Just don’t forget to NFP Report in the United States Economic data is still due later today, and growing speculation of a Federal Reserve rate cut in September could lead to higher risks ahead of the close.
No matter how you trade this setup, make sure you follow your trading plan and use the best risk management moves so you can trade another day!