Step one: bullish patterns fail
Step two: bearish patterns work
A simple yet extremely powerful concept.
We did a deep dive into this today for CappThesis clients.
Here are some highlights.
The First Live Bearish Pattern Since April
With yesterday’s rollover in the S&P 500 and the subsequent downside break of the 6,760 zone, a bearish pattern we’ve been tracking was finally triggered — the first since April. This aligns with the blueprint we’ve discussed since the downturn began.
The failed bounce from Wednesday formed the pattern’s lower high, setting up a potential bearish inverse cup-and-handle 🔴.
Yesterday’s follow-through was strong enough to confirm the downside break.
From a percentage standpoint, the downside target near 6,610 sits less than 2% below current levels — but given the S&P is already down about 3% from the high, reaching that zone would mark the largest drawdown since April. 📉
We respect every pattern — bullish or bearish, big or small — because the key is knowing what’s working and what’s not. If this bearish setup continues to unfold, it could be signaling that momentum is shifting further to the downside.
🗓️ Looking Back:
The first bearish pattern we tracked this year played out in February, before the “tariff tantrum” that followed. It emerged after several failed bullish breakouts and preceded two more bearish formations before that decline finally ran its course.
Another bearish setup developed in the spring — it took four weeks to form, but once the downside break hit, the target was reached in just two days ⚡️— a reminder of how quickly momentum accelerates once two-way volatility kicks in.
As is often the case, bearish patterns emerge from failed bullish formations. Yesterday’s downturn undercut the prior breakout zone near 6,750, effectively negating the bullish cup-and-handle pattern that had been targeting 6,950.❌
We haven’t seen many failed bullish setups this year — just one minor case a few weeks ago — but with this latest move, it’s back to square one for the bulls.
Potential Patterns
Of course, that’s not all — there are other potential formations still in play and these could play major roles very soon…
Frank, very good analysis.
Thanks a lot, Kevin.