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Stock markets reversed the losses on Friday

Double Top in Play in S&P 500 As Stock Markets Retreat

Posted Tuesday, December 27, 2022 by
Skerdian Meta • 2 min read

Stock markets reversed the losses on Friday

The holiday mood will keep stock markets quiet until next Tuesday, but we might see some volatility as the new year comes underway. I have been watching S&P 500 for some time after the buy signal we had closed in a loss as stock markets started to reverse.

The reversal is continuing to play out for now, with the double-top pattern forming a top at around 4,100 points which is a key trendline resistance (top blue line) for the year providing a strong set of technical zone for sellers to load up. The 200 SMA (purple) was acting as suport on the H4 chart since early November when the price moved above it, as the FED was softening its rhetoric regarding rate hikes.

S&P 500 H4 Chart – Can the 200 SMA Turn Into Resistance?

The double top pattern points to a low at around $3,700 points

But the bearish presssure of the last two weeks since the last round of rate hikes by central banks resulted in a break back below the 200 SMA before the decline only halted by the 50.0 Fibonacci retracement level of the recent swing move higher, comming at 3,796.

That is an important level to watch over the coming days, even with the thinner market conditions. Below that will be the target of the double-top pattern, at the November low around 3,700. The rally in the last 2-3 months of this year might have ended for stocks but I reckon investors are probably happy enough to not have been dealt another severe blow on the charts before Christmas.

Although as we approach the turn of the year, things could get ugly if we do see a break of the key levels highlighted above. The weaker global growth points to a recession in the developed economies, while inflation is falling, yet still remains high. So, we might see a bearish continuation particularly next week, expecially if the FED keeps banging on rate hikes.

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