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December 20, 2021

Markets Are Tumbling... Do This Now

Frank Cabibi

12/20/2021

As the omicron wave pushes its way through the US and Europe, global equities markets remained mostly mixed or are in the red. Employees are not returning to their office jobs as companies are closing early, basketball and hockey games are getting canceled, and shows postpone or or are discontinued for the year.

Our outlook

Things look gloomy going into the end of the year while further downside is expected by most investors. However, there is a lot of potential for the stock market going forward regardless of the expected interest rate hikes in 2022. I think investors can find some comfort in the possibility that the Fed will step in some way to counteract the potentially-harmful action on the stock market. There are some things that you should be doing now to protect your account in this volatile time.

One, keep mostly cash while you look for setups. Buying on the way down isn't a bad thing, but make sure you are keeping enough to pad yourself enough for the possibility of a continuation to the downside or an extended period of lows.

Secondly, take smaller lots to ensure minimal loss on losing trades, even though it means you will not be making as much. The holidays can be a very interesting time with pockets of little volatility before a sudden spike in activity, at least in the US stock market.

Trade Setups

SPX500

SPX500 fell once again today by over 2%, but seems to have bottomed out in the $4530s. Some rejection from the lows could suggest a move higher as a potential new trend line formed. Price crossed under the 50 DMA which could be a bearish indicator for the index as well. Additional support lies at a lower trend line around the $4490s.

NAS100

NAS100 fell under its 50 DMA and trend line as well and might have formed a double bottom around $15,520. If today's candle can close around the $15,670s near previous days' closes, we could see somewhat of a hammer formation and a potential bounce from the double bottom.

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