Bearish candlestick patterns are emerging for key tech names like Nvidia Corp, signaling a possible short-term reversal in the bullish trend. This could have significant implications for the S&P 500, especially if mega-cap growth stocks start to falter. The bearish engulfing pattern seen in stocks like Nvidia, Micron Technology, and the VanEck Vectors Semiconductor ETF suggests that traders are selling strength to rotate stocks into a short-term distribution phase.
The first “line in the sand” to watch for the S&P 500 is around 5,400, as long as it stays above this level and maintains a trend line of major lows since October 2023, the market will remain in a bullish setup. However, a fall below 5,200, representing a 5% pullback from the recent peak, would indicate increased correction risk. If the S&P were to drop below 4,950, it could signal a deeper and longer correction, prompting investors to consider more defensive positioning.
Using a “traffic light” technique, these key levels can help interpret market price action. Holding above 5,200 indicates a strong market position, while a drop below this level would lead to a reassessment of long positions and potential cash raises. Falling below 4,950 would require a much more defensive approach, waiting for signs of accumulation before re-entering the market.
It is essential for investors to define risk levels clearly to better prepare for potential market shifts. While it may be tempting to wait for more gains during a bull market phase, having a plan in place can help navigate uncertain market conditions. The opinions expressed are solely those of the author and should not be considered financial, investment, tax, or legal advice. Readers are encouraged to consult with their financial or investment advisor before making any decisions based on this information.
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https://www.cnbc.com/2024/06/21/sp-500-levels-to-watch-if-troubling-chart-patterns-in-nvidia-and-other-tech-mean-a-sell-off-is-near.html
