A Clear Break of Support for the Markets may Bring More Downside

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
December 15th, 2022

2 mins read

We are seeing  a reaction to the fears of a recession coming back strong today.

It’s not that recession fears had completely gone away in 2022.  It’s just now that we are past the Federal Reserve Open Market Committee’s latest decision on interest rates, (which by the way, they decided to raise rates yet again, but at a half percentage point this time), investors are being reported going back to their concerns of the Fed leading the US economy into a recession.

That fear right there is what is being attributed to this major sell-off in the markets today.

Support is Broken

Figure 1: 100-Day Candle Chart on SPY (Break of Support)
Figure 1: 100-Day Candle Chart on SPY (Break of Support)

It appears that not only is the ascending support being broken on the chart of the SPY, but it is probably going to lose near its lows of the day.

If you think this sell-off is overdone and their may be a snap back tomorrow that is between you and your broker to make a decision to trade that expectation.

Should you feel there is more downside to come, and you want to assess or anticipate a price target lower one can go to the Fibonacci tool once again.

One can take the approach of assessing Fib retracement levels and anticipate one will get hit and using that target price for the basis for a bearish long put trade for example.

If you feel SPY will not hit a Fib level and bounce, but instead find a next level Fib retracement or two, below is my 50-Day Candle Chart with the Fib retracement levels plotted on it so you can see what the next successive price levels lower are.

Figure 2: 50-Day Candle Chart with Fibonacci Retracement Levels
Figure 2: 50-Day Candle Chart with Fibonacci Retracement Levels

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