Technical Analysis

The technical story is the one to watch for stocks ahead of the turn of the year

The holiday mood will continue after the Christmas break but that might not mean a pause in the action for stocks ahead of the new year. I’ve highlighted the technical predicament for the S&P 500 for a while now, ever since before we got to the Fed meeting earlier this month here.

And that story is continuing to play out for now, with the double-top pattern near 4,100 and key trendline resistance (white line) for the year providing a strong set of technical consideration for sellers to take charge. That resulted in a break back below the 100-day moving average (red line) before the selloff was only halted by the 50.0 Fib retracement level of the recent swing move higher, seen at 3,796.

That is a key level to watch over the coming days, despite the fact that we are likely to observe thinner market conditions. Below that will be the measured target of the double-top pattern, seen at roughly 3,760, and then the November low at 3,698.

There might not have been a Santa Claus rally this year for stocks but I reckon investors are probably happy enough to not have been dealt another severe blow on the charts before Christmas.

But as we approach the turn of the year, things could get ugly if we do see a break of the key levels highlighted above.

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