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Yesterday SPY closed below a trailing 3 ATR volatility stop. I looked back over the last few years at the decline from high to low the other times the volatility stop was broken.
I excluded a few in the middle of 2017. That market environment was exceptional/historic momentum. A few breaks that year were smaller than the average on this chart, but for our purposes I am just showing a range of expectation.
So from the precedents here, it seems likely that price would retest the recent highs from September, and possible decline well below that before the correction is over.
As long as price stays below the recent highs, I would anticipate possibility for a sharper sell off into the new year.
