Bearish case from rising wedge in S&P 500

RECENT rallies in the S&P 500 (SPX) have revealed the formation of a bearish rising wedge technical pattern. The rising wedge is characterised by a chart pattern making higher highs and higher lows, with the trading range between the two points narrowing over time.

Looking at past examples, when the rising wedge pattern is formed during an uptrend like the SPX is currently in, it typically signals a reversal pattern. The psychology behind the pattern maintains that the uptrend is steadily losing its strength, as the gap between the highs and the lows continues to narrow.

Assuming the above-mentioned bearish breakdown scenario happens, the rising wedge pattern also typically offers a price target prediction, typically defined as the height of the wedge when it was first formed. This does suggest that a breakout may have around 400 points to fall, likely to around 3850.