SPY bearish pattern invalidated; current formation is potentially bullish but may require consolidation/pullback before reaching new highs.

Today we will be discussing the Standard & Poor's 500 index, some of the major high-growth exchange-traded funds (ETFs), the energy sector, and then Bitcoin. We will begin by analyzing the patterns of the Standard & Poor's 500 index.

We always start our day by analyzing the pattern network.

Simply put, the presence of a greater number of active bullish patterns compared to bearish patterns indicates that the market is in an upward trend, or at least in a consolidation phase without a sharp decline.

Conversely, the presence of a greater number of active bearish patterns indicates that the market is in a breakdown phase or in a downward trend.

Therefore, it is obvious that during most of the past months, we have only seen one or two , and sometimes three, bullish patterns active at the same time. On occasion, when the market experienced a consolidation phase, we saw this twice during the past few months.

Some bearish patterns emerged , but as we can see here, one of them was invalidated after the last two large 1% gains achieved by the S&P 500 index following the last Federal Reserve meeting .

Here's the pattern for the cup and handle, isn't it? 7925. As we mentioned, we have been talking about this possibility since approximately the beginning of June when the first decline occurred.

We thought a higher bottom might form and then a breakout would occur, which took longer than expected , as it looked like it would happen anytime during early July and then towards the end of it.

So, if we had to wait, it was a little longer than expected (number of weeks ), but it did scare away many potential sellers in the meantime, didn't it? Because this area could also have formed a downward pattern.

Thus, the breakout occurred with a large move that lasted 4 days after the last Federal Open Market Committee meeting . This also led to the emergence of this penetration pattern.

So, it took an extra day to achieve that, in early August.

Since then , starting with the second week of August, we have begun to see a slight, albeit slight, decline in the highs and lows, so much so that as the Federal Reserve’s latest meeting approached last Wednesday, it seemed as though things were about to collapse in anticipation of an interest rate hike.

It looked like a prelude to a much sharper decline. At least that's what many people expected. But as we know, that wasn't the case .

So, as we saw at the last Federal Reserve meeting , we saw a sudden rise, bringing the price back to roughly where it was at the beginning of the summer. And so, we continue to search for the next upward pattern.

Again, even as the S&P 500 made lower highs and lows, we anticipated a significant rally from this point, potentially forming the head of an inverted head and shoulders pattern, or perhaps the handle of a cup and handle pattern.

Regardless of how things develop, it didn't look like it would happen, but after two days of significant gains, and over the past three days, we now have what appears to be a strong and potentially bullish formation .

Therefore, I wouldn't be at all surprised to see more consolidation near the 7800 area, and even a pullback over the next week or two to help solidify what this right shoulder may be.

Of course , the plan at that stage will require breaking into new record levels. And then, we may see a move, and of course, reach a much higher goal.

At the same time, as you know, we are always looking for the development of bearish patterns as well. This looked like a classic pattern , which could be called a descending triangle.

It looks to me very much like a cup pattern and an inverted handle, doesn't it? Just a lower peak after reaching the peak.

Thus, the index remained in a state of collapse for four days. And again , with the Federal Reserve meeting approaching and near-term support weak, it was quite possible that the index would fall and reach the 7460 target. That target isn't too far off , is it?

But we believe it is more important if we consider the significance of finally reaching a downward target, because we have not seen such targets in 2026, especially since the low in March.

When this happens, it may lead to the market moving in the opposite direction, with stocks being sold off after the rallies.

Therefore, at the moment, avoiding this scenario has been clearly positive for the S&P 500 index in the market overall. In the short term, we have seen a lot of volatility recently, but we prefer to use this indicator as a guide, do n't we?

Especially if it is related to events in the next week or two.

While the Standard & Poor's index was absorbing the large rise of nearly 7% about four days ago, we saw some moderate, albeit slight, gains that did not succeed in bringing the index back above its previous highs.

At the same time, these rallies came, once again , after the Relative Strength Index (RSI) on the two-hour chart reached the oversold zone, but the absence of any indication of a short-term overbought condition showed us that these rallies were not strong enough, right? There wasn't enough momentum.

So, we go back to just before the Federal Reserve meeting , where the index fell back into the oversold zone , setting the stage for a possible rebound, which did indeed happen, and now, just a few days later, the index has risen sharply back into the overbought zone .

Now, we can compare this rise to the highs we've seen since the lows in late March, and many of them are similar, aren't they? The index rose by between 3 and 4% throughout the upward period.

We began to notice a slight decline in this ratio, you know, in June, which suggests that although the strong rallies continued for several days without reaching new record levels and without leading to overbought conditions, things may have been slowing down a little.

So now, after rising by approximately 4% in a short period, at best, the index may fall further, perhaps reaching an oversold area again, but this fall will remain within this range, forming a higher bottom, and then it will start rising from there, which is what actually happened.

We know that this was one of the main reasons that enabled the S&P index to benefit from this rise from its lows and continue to climb.