Stocks’ losing streak has pushed S&P 500 exchange traded funds to their low for the year as they test the neckline of a bearish “head and shoulders” pattern.

“That top needs to break down pretty much immediately; otherwise it will likely fail to play out. With the index testing the neckline region, it’s on a precipice and how the index acts over the next several hours is critical,” said Tarquin Coe, a technical analyst at newsletter service Investors Intelligence.

“Blood is certainly on the streets and indicators are oversold so today may prove to be a buying opportunity,” he added.

With well-known patterns such as the bearish head and shoulders formation, there could be a bear trap in the making.

“Such a dummy move could see the S&P 500 fall down to 1233.19, a Fibonacci 38.2% retracement of the rally off the 2010 July low to the 2011 high, and then reverse,” Coe wrote Wednesday.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.