Equities Watchlist: Reversal Pattern Breakdown on S&P 500 Index?


 If you're counting on risk-off flows to pick up, you might wanna watch out for this neckline break!

Think this U.S. equity index is in for a downtrend soon?

Here are the levels to keep an eye on:

S&P 500 Index (SP500): 4-hour

S&P 500 Index (SP500) 4-hour ChartS&P 500 Index (SP500) 4-hour Chart by TradingView

Check out the S&P 500 completing its head and shoulders formation!

The stock index is closing in on the neckline support around 4,000, probably gearing up for a breakdown and selloff soon.

After all, the moving averages just made a bearish crossover to confirm that sellers are taking control of the game. In that case, the index might be in for a drop that's the same height as the chart pattern.

Just be careful when shorting at market since Stochastic is still indicating oversold conditions, so we might see some hesitation around the support zone before bearish pressure kicks in.

Risk rallies have had trouble gaining traction this week after Fed head honcho Jerome Powell highlighted the possibility of more aggressive tightening moves in the future.

He pointed out that, if U.S. economic data continues to surprise to the upside, the central bank is prepared to step on the gas when it comes to hiking interest rates.

This means that the upcoming February NFP release might trigger yet another surge in risk-off flows (a.k.a. stock market selloff) if the results beat expectations again, just like it did for the January report.

Note that the ADP employment figure and JOLTS job openings have both surpassed estimates, so we just might be in for an upside NFP surprise!