Is the Stock Market Rally Off the June Lows Over?

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
August 22nd, 2022

2 mins read

The equities markets have experienced a nice run higher off the June lows.

Depending on who you listen to or read regarding the status of the stock market, you likely have heard terminology the likes of ‘the market is overbought’ or ‘this is nothing but a bear markets rally.’

That very well may be the case and after today it wouldn’t surprise me to know more people are expecting the markets to go lower rather than higher right now.

The markets may snap back a bit tomorrow as people may be costs averaging in on some of their recent higher priced purchases, there is a technical situation that has us leaning more in the camp of expecting lower prices.

2 Technical Charts on SPY Which May Mean Lower Prices are to Come

The charts in this educational piece show a couple of ways one can look for a potential price target lower and or support price area for the SPY.

If one does not expect this drop today to continue and they expect the rally off the June lows to resume then disregard these charts.

If one does anticipate a further drop in the markets here are a couple of scenarios that may play out. 

These are offered up as education as to the technical situation and the way we read the charts.

We do this to ascertain a potential price point that the security shown, the SPY, may move to. We do this to consider one or both of these ideas,

Idea 1

One can consider trying to go long put options, which go up in value with the price of the security those options are on drops.

Idea 2

One can anticipate the security dropping to a support price area in which they would then consider going long securities or call option on securities.

There are many different technical indicators and oscillators and one can add in as many as they want.

Items like the MACD, RSI, Stochastics – slow or fast are a few that can be used.

The key thing is to make sure you are being objective and not adding a bunch of them onto the chart so that you can justify trading based on where you think the security is going to go.

Figure 1: SPY Candle Chart with Possible Potential Support
Figure 1: SPY Candle Chart with Possible Potential Support
Figure 2: SPY Fibonacci Chart off June Lows
Figure 2: SPY Fibonacci Chart off June Lows

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