Hiya,
From what you've said it sounds to me like you should check how the roots are under the surface of the pot. If they are bad (soft, dark) then overwatering is probably your problem. If they are green and firm, then get back to us! Don't panic, and as long as you have at least a leaf and a root, then your plant can be saved, so yours is not in such a bad place at the moment!
If it is overwatering, then I would suggest cutting the spike off and putting it in water so you can enjoy the blooms, but the plant can put its energy into recovering, then sorting out the roots under the surface- repotting, getting rid of the bad ones and treating (check on this board, there are lots of threads about how to do this) and then holding back from the water a bit to encourage your phal to put out roots (while keeping humid). If there are few good roots left, then the Sphag and Bag seems the way forward (google and you'll find a tutorial, or again other threads here are helpful!)
I'm sure others will dive in as well to give you some good tips, but make sure you give those roots a check first!
Kay
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