SPY (S&P500) has dropped 4.5% since highs were set on November 22nd. Huge selling has been seen across many markets, including large caps, small caps and crypto. So what is in store now?

The markets have sold off for a few reasons. Firstly, the Omicron variant has spooked markets as South Africa announced their reports. Powell is another reason that the markets have become more bearish. Also, end of year tax selling may be helping the downside momentum.

Where may we see some support come in. There are a few areas to watch out for. Shorter term targets to see some buying come in are at $448 and $445. These are levels that rejected at the end of September. Resistance turned support. Another level to watch is the white line, a trend line which can be seen more clearly on the weekly chart.

If we drop below these, I think we could see a 10% correction from highs. This would take us to the $430 area. This area also saw support on previous corrections and is supported by the 200MA. However, the volume profile is very low in this zone. The higher the volume profile is, the stronger that area will act as a pivot. If a zone has low volume, price can move more easily through it, both for the upside or downside.

Chart provided by TradingView
Chart provided by TradingView

We’ll be keeping an ear out for any news that could change the sentiment of the market, especially in relation to clarification on the new COVID variant.

Overall, I think we may see more downside. It is worth taking a look at your portfolio to see where you can hedge yourself. You can read more about that here. For day trades and short term swings, take profits earlier than usual if you are playing the long side. Make sure to be keeping an eye on good stocks to buy up when the market shows more strength. Although this may be worrying for some, it will always provide good opportunities for a good recovery later on.

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