Some candlestick patterns in leading tech names have me eyeing potential downside targets for the S&P 500. Because if mega-cap growth stocks start to falter, it could be a dangerous summer for our growth-dominated benchmarks. We’ve seen bearish candlestick patterns in key tech names this week, with Nvidia Corp ( NVDA ) and other semiconductors showing the dreaded bearish engulfing pattern. After an extended bull run in these stocks, this may at least indicate a meaningful pause in the relentless uptrend. Here we see confirmed bearish engulfing patterns for VanEck Vectors Semiconductor ETF (SMH), Nvidia, and Micron Technology (MU). This two-day pattern suggests a potential short-term reversal, with a long up day immediately followed by a long down day. Why is this formula so powerful? Because the next day, after opening higher, traders sell power to turn the stock into a short-term distribution phase. And by closing below the first day’s open, the price confirms a likely bearish turn in sentiment. To be clear, this is a short-term pattern and is really only meant to inform our thinking for the next few trading sessions. But I’ve often found that significant candlestick patterns occur at market extremes, as a short-term reversal leads to further deterioration as investors fear a potentially wider and more painful decline. Given bearish near-term signals from some key leading names, as well as overbought conditions in our major benchmarks, I’ve revised some targets to the downside for the S&P 500. Simply put, what would we need to see in terms of price action to confirm a summer top in the market? In terms of short-term reversal signals, the recent price gap around the S&P 5,400 is the first “line in the sand” in my opinion. As long as the S&P remains above this level and also holds the trend line created by the alignment of major lows from October 2023, then this market is still in a very bullish configuration. But what if the bearish candlestick patterns we’ve seen are just the beginning and we see more weakness in the next week and beyond? The most important level to watch is the S&P 5,200, which would represent about a 5% decline from the market’s recent peak. A five percent pullback is actually quite common, even during the raging bull years of market history. If the S&P 500 were to break below 5200, it would not only mean that it failed to hold the recent price gap, but also fell below the 50-day moving average as well as the last major low since the close. May. If 5,200 does not hold, then I would consider the S&P 4,950 as the “point of no return”. This level is based on the April 2024 price low as well as the 200-day moving average. If we were to see enough downward pressure that the 200-day would not sustain, a deeper and longer correction would be very likely and investors would have to strongly consider a more defensive position. One way to visualize this kind of framework is to use a “stoplight” technique based on these key “lines in the sand” for the S&P 500. How would I interpret the price action around these levels? If we stay above 5200, then this market is still very strong, despite any kind of short-term price spread. A move below the S&P 5200 would cause me to revisit long positions and start adding cash due to the increased risk of a correction. If and when the S&P pushes below 4950, I will be much more defensive and wait for some signs of accumulation. During a bull market phase, it can be very comfortable to close your eyes and hope for more growth. However, savvy investors know that by clearly defining their level of risk, they can be best prepared for whatever lies ahead. -David Keller, CMT marketmisbehavior.com DISCLAIMER: (None) All opinions expressed by CNBC Pro contributors are solely their own and do not reflect those of CNBC, NBC UNIVERSAL, their parent company or affiliates and may have previously been disseminated on television, radio, the Internet or otherwise medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF AN INDIVIDUAL. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. YOU SHOULD STRONGLY CONSIDER SEEKING THE ADVICE OF YOUR OWN FINANCIAL OR INVESTMENT ADVISOR BEFORE MAKING ANY FINANCIAL DECISION. Click here for full disclaimer.