ES1! - W-Pattern Reversal at $6,850 or Breakdown? Tariffs??E-mini S&P 500 FuturesCME_MINI_DL:ES1!officialjackofalltrades What's up traders! 👋 The S&P 500 E-mini futures are at a CRITICAL decision point after Monday's brutal selloff. We've got AI displacement fears crushing software stocks, Trump raising tariffs to 15%, and private credit concerns spreading. Let me break down what's happening on the 1-hour chart and why the next move could be MASSIVE. The Setup ES1! is trading around $6,900 after Monday's -1.04% dump. Price is forming a potential W-pattern (double bottom) with support at $6,820-$6,850, while resistance sits at $6,950-$7,000. We're in a consolidation zone after testing support twice. The big question: Does this W-pattern hold and reverse to $7,100+, or do we break below $6,820 for a dump to $6,700 or lower? Why This Setup Matters W-pattern (double bottom) = potential bullish reversal Support at $6,820-$6,850 tested twice and holding Resistance at $6,950-$7,000 capping rallies AI DISPLACEMENT FEARS crushing software sector (-25% YTD) IBM -13% after Anthropic coding tools launch Software sector existential crisis (AI replacing jobs) Trump raised tariffs to 15% (Supreme Court chaos) Private credit concerns (Blue Owl -6%, halting redemptions) Defensive rotation (healthcare +1%, staples +1%, financials -3%) Market down Monday: S&P -1.04%, Dow -1.66%, Nasdaq -1.13% The News Context - February 23, 2026 This is a MIXED picture - AI disruption fears vs defensive resilience: Bearish catalysts (DOMINANT): AI DISPLACEMENT FEARS - Software sector -25% YTD (existential crisis) IBM -13.1% after Anthropic unveiled new coding tools American Express -7.2% on AI-driven job loss research CrowdStrike -9.9%, Oracle -4.6%, Applovin -9.1% Visa -4.5%, Mastercard -5.8% (payment sector AI fears) Software companies face higher borrowing costs, tougher scrutiny Trump raised tariffs to 15% under Section 122 (150-day window) Supreme Court struck down tariffs, Trump immediately retaliated European Parliament paused US trade deal ratification Tariff uncertainty returns (Congress unlikely to approve) Private credit concerns: Blue Owl -6%, halting redemptions Blue Owl selling $1.4B assets (software sector exposure) KKR -9%, Apollo -5% (contagion fears) UBS: Private credit defaults could rise 8% in worst case Financials -3.3% (biggest fall since April) S&P 500 back to negative YTD (-0.1%) Nasdaq -3% YTD, software sector wiped out post-Liberation Day gains Bullish/Defensive factors: Defensive rotation: Healthcare +1%, Consumer Staples +1% Walmart +2.3% (defensive play) Eli Lilly +4% (Novo Nordisk drug underperformed) Domino's +4.4% (Q4 same-store sales beat) PayPal +5.8% (takeover interest reported) Six S&P 500 sectors rose (defensive leadership) Gold +2.1% (safe-haven flows) Treasuries rallied (yields down 7bps at belly) Swiss franc, Japanese yen gained (safe-havens) Nvidia +0.9% ahead of earnings this week Market breadth impressive (greatest % outperforming in 50 years) S&P 500 in tight 2.7% range for 2+ months (resilience) Key Levels I'm Watching Resistance: $6,950-$7,000 - CRITICAL RESISTANCE ZONE / Red zone on chart $7,050 - Secondary resistance $7,100 - Breakout target if W-pattern confirms $7,200 - Extended target Support: $6,900 - Current price / Consolidation mid $6,850 - Immediate support / W-pattern neckline $6,820-$6,850 - MAJOR SUPPORT ZONE / Green zone / Double bottom $6,750 - Secondary support $6,700 - Breakdown target if support fails $6,600 - Extended support Pattern Analysis - W-Pattern (Double Bottom) vs Breakdown Price is forming a potential W-pattern (double bottom) with two tests of support at $6,820-$6,850: First bottom: Test of $6,820-$6,850 support (held) Rally: Bounce to $6,950 resistance (rejected) Second bottom: Retest of $6,820-$6,850 support (held again) Current: Consolidating around $6,900, testing resistance W-pattern confirmation: Break above $6,950-$7,000 with volume Target: Measured move to $7,100+ if confirmed The key is whether support at $6,820-$6,850 holds (bullish W-pattern) or breaks (bearish breakdown). Two Scenarios SCENARIO 1: W-Pattern Reversal (CAUTIOUS - 45%) Support at $6,820-$6,850 holds, price breaks above $6,950-$7,000 resistance, confirming W-pattern reversal. Hold $6,820-$6,850 support (double bottom confirmed) Break above $6,950-$7,000 resistance with volume Target 1: $7,100 (measured move from W-pattern) Target 2: $7,200 (extended target) Triggers: Defensive rotation continues (healthcare, staples leadership) AI displacement fears fade (market adapts) Tariff uncertainty resolves (Congress clarity) Private credit concerns contained (no contagion) Nvidia earnings strong (Wednesday) - tech stabilizes Market breadth remains strong (50-year highs) S&P 500 tight range holds (resilience continues) This aligns with: W-pattern double bottom holding Defensive sectors showing strength Safe-haven flows (gold, Treasuries) Market resilience (tight 2.7% range for 2+ months) Breadth impressive (greatest % outperforming in 50 years) Support tested twice and held SCENARIO 2: Breakdown Below Support (55%) Price breaks below $6,820-$6,850 support, invalidating W-pattern, targeting $6,700 or lower. Break below $6,820-$6,850 support W-pattern invalidated Target 1: $6,750 (secondary support) Target 2: $6,700 (breakdown target) Target 3: $6,600 (extended support) Triggers: AI displacement fears escalate (more job losses) Software sector collapse continues (-25% YTD worsens) Private credit contagion spreads (Blue Owl → KKR, Apollo) Trump tariff chaos escalates (15% becomes permanent) Nvidia earnings disappoint (Wednesday) - tech selloff Financials weakness spreads (-3.3% continues) Defensive rotation = risk-off signal This would align with: AI displacement existential crisis Software sector -25% YTD (worst performer) Private credit concerns (Blue Owl halting redemptions) Tariff uncertainty (Trump chaos) Financials -3.3% (biggest fall since April) S&P 500 back to negative YTD Risk-off flows (gold, Treasuries, safe-havens) AI Displacement Crisis - The Elephant in the Room Why This Matters: Software sector -25% YTD (WORST performer) Existential crisis: AI replacing software jobs IBM -13% after Anthropic coding tools (AI writes code) American Express -7.2% on AI job loss research Payment sector hit: Visa -4.5%, Mastercard -5.8% CrowdStrike -9.9%, Oracle -4.6%, Applovin -9.1% Software companies: Higher borrowing costs, tougher scrutiny Circular investment concerns (Big Tech investing in each other) Limited evidence AI paying off (high valuations, no ROI) Market Impact: Software sector wiped out post-Liberation Day gains Tech leadership broken (Nasdaq -3% YTD) Defensive rotation (healthcare, staples leading) Risk-off sentiment (gold +2%, Treasuries rally) Productivity boom vs workforce dislocation Kansas City Fed: AI productivity surge, but workforce can't adapt Government policy needs to keep pace (worker assistance) The Critical Question: Is this a temporary panic or a structural shift? If AI truly displaces millions of jobs without replacement, the economic impact is MASSIVE. But if the market adapts (like past tech revolutions), this is a buying opportunity. Trump Tariff Chaos - Uncertainty Returns What Happened: Supreme Court struck down Trump's reciprocal tariffs (6-3) Ruled he overstepped authority under emergency powers Trump IMMEDIATELY raised tariffs to 15% under Section 122 150-day temporary window (Congress unlikely to approve) European Parliament paused US trade deal ratification Potential $175B in tariff refunds from old tariffs Uncertainty returns despite court ruling Market Impact: Initial relief rally on court ruling But Trump's 15% tariff brought volatility back Trade deal uncertainty (Europe paused ratification) Inflation concerns (tariffs = higher prices) Economic fog thickens (tariff rates up in the air) Winners: Defensive sectors (less tariff-sensitive) Losers: Cyclicals, industrials, consumer discretionary Private Credit Concerns - Contagion Risk What's Happening: Blue Owl -6% (down 25% this month) Halting redemptions at one fund Selling $1.4B assets (liquidity concerns) Exposure to battered software sector (AI damage) KKR -9%, Apollo -5% (contagion fears) UBS: Private credit defaults could rise 8% (worst case) Opaque world of private credit = hidden risks Market Impact: Financials -3.3% (biggest fall since April) Liquidity concerns spreading Software sector exposure = toxic Alternative asset managers under pressure Credit tightening = economic headwind Reminiscent of 2008 shadow banking concerns Defensive Rotation - Risk-Off Signal What's Working: Healthcare +1% (Eli Lilly +4%) Consumer Staples +1% (Walmart +2.3%) Utilities +0.2% Real Estate +0.2% Gold +2.1% (safe-haven) Treasuries rallying (yields down 7bps) Swiss franc, Japanese yen (safe-havens) What's Not Working: Financials -3.3% (private credit fears) Consumer Discretionary -2.7% Industrials -1.3% Information Technology -1.0% Software sector -4% (AI displacement) What This Means: Defensive rotation = risk-off sentiment. Investors fleeing growth/tech for safety. This is a WARNING SIGN that the market is nervous about AI disruption, tariffs, and private credit. My Game Plan Bearish scenario (PRIMARY - 55%): I'm leaning SLIGHTLY BEARISH here. The AI displacement fears are REAL and structural - software sector down 25% YTD is not a blip. IBM -13% after Anthropic coding tools shows the market is pricing in existential risk. The private credit situation (Blue Owl halting redemptions) could spread contagion like 2008. Trump's 15% tariff brings back uncertainty. Defensive rotation (healthcare, staples leading) is a risk-off signal. If we break $6,820 support, I'm targeting $6,700-$6,750. Bullish scenario (45%): The counterargument is that the market has shown INCREDIBLE resilience - S&P 500 in a tight 2.7% range for 2+ months despite chaos. Breadth is at 50-year highs (greatest % outperforming). The W-pattern double bottom at $6,820-$6,850 has held twice. Defensive sectors are RISING (not just tech falling), which shows rotation not panic. If support holds and we break $6,950-$7,000, I'm targeting $7,100+. Key catalyst: NVIDIA EARNINGS WEDNESDAY. If Nvidia delivers strong earnings, tech could stabilize and the W-pattern could confirm. If Nvidia disappoints, the AI displacement narrative accelerates and we break support. The Bottom Line I'm SLIGHTLY BEARISH on ES1! with a focus on the $6,820-$6,850 support. The setup is precarious: Bearish factors (DOMINANT): AI displacement fears (software -25% YTD) IBM -13%, payment sector crushed Private credit concerns (Blue Owl, KKR, Apollo) Trump 15% tariff (uncertainty returns) Financials -3.3% (biggest fall since April) Defensive rotation (risk-off signal) S&P 500 back to negative YTD Bullish factors: W-pattern double bottom holding Market resilience (tight 2.7% range) Breadth at 50-year highs Defensive sectors RISING (rotation not panic) Safe-haven flows (gold, Treasuries) Nvidia earnings Wednesday (potential catalyst) The $6,820-$6,850 support is KEY. Hold = W-pattern reversal to $7,100. Break = dump to $6,700 or lower. But the AI displacement narrative is the REAL story. If the market believes AI is replacing millions of jobs without replacement, this is just the beginning of the selloff. What do you think? W-pattern reversal or breakdown? Drop your take! 👇 If this helped, smash that 🚀 Boost button! Not financial advice. DYOR.