The technical analyst warns that the market decline will trigger dormant sell signals if stocks do not rebound “significantly.”

• Analyst Katie Stockton said stocks need to recover decisively by Friday to avoid a sell signal faltering.

• If some technical indicators flash, it will indicate a 10% correction, she wrote.

• However, seasonal strength can help stocks recover quickly.

Investors are returning to the stock market after Wednesday’s stunning decline, but problems may still remain.

According to Katie Stockton, the size of the recovery will determine how much risk still lies ahead for investors.

“If we don’t recover significantly between now and Friday’s close, which is just two days away, we will see sell signals in our medium-term metrics,” said the founder and managing partner of Fairlead Strategies. CNBC. “This will be the first time in months that we have seen this.”

In a written commentary, the technical analyst noted that the weekly stochastic indicator — which identifies overbought and oversold conditions in the market — is at risk of “pullback into overbought territory.”

Meanwhile, I wrote that the signal known as Moving Average Convergence Divergence indicatorThe MACD may issue its first sell signal since July. The MACD indicator tracks momentum and trends across multiple time frames and is attractive for its clear judgments, which go one of two ways: buy or sell.

Once both indices issue a sell signal for the S&P 500, investors should prepare for a potential 7%-10% correction in the medium term, Stockton wrote.

It is certainly not a given that this will happen. Although the main indicator fell near 3% on Wednesday After the Fed took a hawkish tone at its meeting, the selling occurred before the market entered a historically strong phase.

“This actually comes at an interesting seasonal time because we typically see the Santa Claus Parade, which is the last five days of the year, the first two days of the new year, typically,” Stockton said. “So, with the re-imposition of sanctions, it is possible that they will continue until the end of the year, and perhaps a little beyond that.”

Concerned investors should wait for medium-term sell signals to take effect before hedging, she wrote.

Yet others see too High risk of correction. Market veteran Ed Yardeni expects stocks to remain “volatile” through January, citing profit-taking, a possible dock strike, and a wave of executive orders when Donald Trump takes office.

“We cannot rule out a 10% correction in the stock market, but we view this as a buying opportunity and not a reason to panic out of the market because we do not expect a recession or bear market,” he wrote. Thursday.

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