The Vanguard S&P 500 ETF (VOO) has moved sideways in the past few weeks and is hovering near its all-time high as the earnings season continues. VOO was trading at $630, a few points below the all-time high of $640. While the fund has bullish catalysts, there is a likelihood that it will suffer a reversal soon.
VOO stock is flashing bearish signals
The daily timeframe chart shows that the VOO stock price has been in a slow uptrend in the past few months. It jumped to a record high of $640, up by 45% from its lowest level in April
However, there are signs that the index has formed a rising wedge chart pattern, which is made up of two ascending and converging trendlines.
The upper side of this pattern connects the highest swings since October, while the lower side connects to August last year. These two lines are now nearing their confluence, where bearish breakouts happens.
The fund has also formed a bearish divergence chart pattern, which happens when oscillators are moving downwards as the asset continues rising. The Percentage Price Oscillator (PPO) has been moving downwards and the two lines are nearing their zero line.
Also, the Relative Strength Index (RSI) has formed a descending channel. Therefore, the ETF will likely have a bearish breakdown in the coming weeks, with the next key target being at $600, its lowest level on November 21.
On the other, a move above that all-time high of $640 will invalidate the bearish outlook and point to more gains, potentially to the resistance level at $700.
VOO ETF stock | Source: TradingView
S&P 500 Index retreat could be brief
A S&P 500 Index pullback would be a normal part of the uptrend. For example, the ETF pulled back by over 6% from its highest point in October to the lowest level in November last year.
The view mirrors that of Tom Lee, the founder and chief analyst at FundStrat, a top analytics company and the Chairman of BitMine, who believes that the S&P 500 Index may drop by between 10% and 20% and then rebound.
US stocks have numerous catalysts this year. For one, the Federal Reserve will likely continue cutting interest rates this year. A Polymarket poll shows that most traders expect the bank to deliver three rate cuts this year.
The stock market normally does well when the Federal Reserve is cutting interest rates as we saw during the COVID pandemic.
Meanwhile, corporate earnings are doing well. About 7% of all companies in the S&P 500 Index have published their fourth quarter results, with the average earnings growth being 8.2%. If this is the final figure, it will be the tenth consecutive quarter of earnings growth.
Analysts believe that corporate earnings will be strong this year as demand continues rising in the United States and other countries.
Meanwhile, there are signs that the Supreme Court will end Donald Trump’s tariffs in a ruling that could come as soon as this month. Such a move would be good for companies in the S&P 500. However, the impact would be short-lived as Trump has tools to reimpose his tariffs.
The S&P 500 Index will also benefit from the ongoing artificial intelligence boom, which will likely continue in the foreseeable future. Just this week, Jensen Huang noted that his chips supply were largely sold out for the year.
There are odds that corporate activities will surge this year. BitGo has already filed its IPO, and more companies like SpaceX and Anthropic will go public this year.
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