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The S&P 500's 4% decline over the past week has created oversold levels according to technical analyst.
The new Omicron variant spread fear across the markets.
The key support and resistance levels are what investors should watch to gauge the direction of the next move in stocks.
The stock market's 4% decline over the past week doesn't sound bad, given that the S&P 500 is up 22% year-to-date, and yet investors are still on edge, anticipating that this decline might be the start of a larger correction ahead.
Wall Street's fear gauge has soared as much as 70% since Friday due to fears of the new Omicron variant and comments from Fed Chairman Powell. The stock market is currently hitting oversold levels, suggesting that a rebound is imminent.
The S&P 500 is showing signs of exhaustion according to a technical analyst.
The market internal measures are showing a collective oversold extreme, with four readings flashing green for the first time since September 24, 2020. This creates a supportive backdrop for a strong rebound. If a rebound doesn't happen, it would be a reason to expect a correction.
The technical support and resistance levels are being monitored to see what direction the next move in stocks may take.
The S&P 500 is a stock market index.
"The S&P 500 needs to rebound above 4540 to avoid a breakdown below its 50-day moving average which would put next support near 4300," he said.
A strong close back above support would provide a contrarian bullish takeaway. The S&P 500 was up 1.3% at the time of publication.
Strategies for fairlead.
The Russell was born in 2000.
The Russell 2000 small cap index is currently below the 2200 area, which would suggest a continued sell-off. The index moved from oversold to overbought in three weeks. The Russell 2000 was up 1.6% at the time of publication.
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The index is used to measure the level of risk.
The sell-off in stocks has been highlighted by the surge in the VIX. The weekly close of the CBOE's volatility index could be a clue as to whether the stock market is about to enter a high volatility regime.
The next two days will determine whether the breakdowns are confirmed and whether the VIX will finish the week above our risk threshold.
A weekly close above that level will confirm last week's surge and could lead to a period of heightened volatility. The VIX fell to 28.94 at the time of publication.
Business Insider has an original article.
