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Aaron Basile
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Contrarian Investor, Commodities Speculator, Technical Trader.
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Aaron Basile
  • Significant Selloff in the S&P Coming? 0 comments
    Sep 16, 2010 2:46 PM | about stocks: SPY

    The last three days we hit on or just below the 113.22 resistence level on the SPY but more importantly the actual index hit the high end of the 1120 range for the third time in the last three months. Each resulted in a small sell day, followed by another large sell day, or a series of sell days.

    June 21st we pushed the 1131 before falling back to a close of 1113 and a number of down days that brought us all the way to 1023. The next top in the cycle came on August 9th where we hit 1129 followed by a 2 point down day which preceded a -28 point catalyst for another series of large selloffs which eventually bottomed out around 1045.

    Yesterday we hit 1126 and currently we’re down -3.43 on the S&P with less than two hours left to trade. For this reason I’m predicting that we have a 30-40 selloff tomorrow or perhaps it might wait until the start of next week on monday, but in any case like I’ve been preaching about, I don’t like the technicals behind this September rally and this could be the final technical move that ends all the weak volume and keeps the market cheerleaders in check.

    Several tops and bottoms at the 385 level on the DJ Utilities, we’re also hovering near that 50 Day MA. Judging by this chart alone it looks like the bottom is 385, but I think the chart above of the S&P tells a different story so I’m watching the 50 Day on the Utilities closely.

    6 Month Russel 2000 Index is getting slammed and looks the be at the top of its current range. Notice how like the S&P it has the small sell days right before the consecutive selloffs at the same time as the S&P does.

    Another thing to go along with all of this is the negative housing data which is always a big scare for Wall Street. Bad housing numbers always makes investors cringe and the timing of it is uncanny. Also, I mentioned it last week but the jobless claims numbers are garbage. The jobless claims have appeared to be look good versus expected losses in the past few weeks however logically thought process tells you that when you have a 2 years of rising unemployment and labor force contraction, the initial jobless claims numbers are bound to contract at some point, but that doesn’t mean that the economy is turning around.

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