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Lawrence G. McMillan

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Sept. 22, 2022, 12:03 p.m. EDT

The S&P 500 is oversold, but dangerous

By Lawrence G. McMillan

The stock market, as measured by the S&P 500 /zigman2/quotes/210599714/realtime SPX +3.09% , broke more support levels this week, and the index is on the verge of testing the June year-to-date lows. The breakdown below support at 3900 was significant, and downside momentum was aided by the Fed’s actions on Wednesday.

This is still a bear market, as denoted by the blue trend lines on the accompanying SPX chart. For that reason alone, one should maintain a “core” bearish position. Also significant are the resistance areas. Now that 3900 has been broken, it is resistance. So are the circled areas, which are island reversals. As we noted last week, island reversals on a broad-based index chart are rare and quite bearish.

There is some potential support at 3800, but a better support area exists at 3720, and then of course at the yearly lows, at 3637. If that gives way there will likely be heavy selling, at least for a short while, as the erstwhile bulls from this summer give up the ship.

/zigman2/quotes/210599714/realtime
US : S&P US
4,080.11
+122.48 +3.09%
Volume: 0.00
Nov. 30, 2022 5:28p
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