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Stocks Battle At S&P 1,850: China's Big Collapse On Horizon

|Includes:SPDR S&P 500 Trust ETF (SPY)

The markets continue to hover around the January 15th, 2014 highs of 1,850.84 on the S&P 500. This week the markets have traded above that level intra-day, then pulled back below by the close. Even today, markets are flip flopping around 1,850.84 as all eyes are on that level. It is clear this is a major resistance level for the markets. A close above, the markets may see a near term short squeeze higher. The move would minor, in the range to 1%-3%.

One interesting factor for the markets is a key cycle anniversary tomorrow. Seven years ago on February 27th, 2007, the markets flushed hard. The Dow Jones Industrial Average was down over 400 points on major fears stemming from China. At that time, it was the 7th largest point drop on the Dow all-time.

It is ironic that China issues are again circulating. There appears to be a major subprime lending issue much like the U.S faced in 2007-2009. In fact the lending is seen by many as being far more reckless than it was in the United States. The government in China has purposely pushed money into the system to create growth, no matter the risk. It appears China is near collapse. The big question is, when? Could the anniversary tomorrow be a tipping point? Will the cycle begin to play out? Just two days ago China's stock market fell 4%. There are financial tremors everywhere but the big one has not hit. The financial media outlets have largely ignored the China issue but it will likely become the next major catalyst for a big market pullback.

Gareth Soloway

Stocks: SPY