SPY is forming a bearish head and shoulders pattern with a potential target at the May lows, implying a ~6% decline.

The S&P 500 is trading on this line, and has seen a notable rise since Friday following a surge of interest in artificial intelligence, then paused temporarily yesterday. The index reached 775 points, and the question was: Will it reach 780 points?

Will it achieve new record levels on the S&P 500 index? We definitely felt that on Monday. But to say that we have seen a major reversal so far would be accurate. We have fallen by about 1% from yesterday's highs on the Standard & Poor's index.

This may not seem like the biggest drop, but does anyone know what pattern we are forming? We are still in the process of formation, and it is not yet complete , is it? So, we still have some work to do, but we are getting closer to forming the head and shoulders pattern.

It is a bearish pattern on the Standard & Poor's index.

Now, it's moving somewhat sideways, slightly upwards , isn't it? But it is still valid. We know that with head and shoulder patterns, we can achieve a well-calculated movement.

Let's take the highest point on the head, bring it down to the neckline, and draw it downwards. Depending on where this pattern eventually breaks, we could see a downward move towards the lows of May , its lowest levels since May.

A decrease of approximately 6% , depending on the point at which this pattern will break . Now, to trade this pattern, you can follow several methods. But in general, with a head and shoulders pattern, you either enter the market when the breakout is confirmed, or let's say it bounces back to the neckline, you can enter there and wait for a dip.