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Failed bounces and downside momentum could mean a new low is ahead, top chart analyst Stockton says

Investors should expect equities to continue to fall and break below a key support level as soon as this month, according to Katie Stockton, founder and managing partner of Fairlead Strategies. “We’ve seen these very quick failed oversold bounces, and that’s a reminder, of course, of the bear market cycle that has a hold,” Stockton said Tuesday on CNBC’s ” Squawk Box .” The top chart analyst expects negative momentum to continue, dragging the S & P 500 below the 3,805-support level this month, according to Fibonacci retracement levels. That would put the next support level for the index around 3,505, she said. The index closed at 3,825.33 last week, its fourth negative week in the last five. After some minor comeback rallies, the benchmark is back down more than 20% from its all-time high and sits just 5% from its bear-market low. Stockton has cited these levels before, noting that two or more weekly closes below 3,815 for the S & P 500 could signal a larger selloff to 3,200 in the coming months. Stockton’s comments come after a losing week and one of the worst first half-of-the-year finishes for markets as investors worry about the potential for a recession. Stock futures also pointed to a lower open Tuesday, with futures tied to the Dow Jones Industrial Average down 260 points or about 0.8%. S & P 500 futures were down more than 1%, and Nasdaq futures shed more than 1.3%. In terms of duration, Stockton expects the downward momentum to last. “I don’t want to be premature in looking for that major low,” she said, adding, “We do suspect based on the way things align right now that September or October would be a very natural place to find at least an intermediate-term low, but as of yet we don’t have indications of that.”

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