The markets are taking a pounding today as fears from Europe reemerge. Yields in Spain have spiked dramatically as a bond auction saw weak demand. Just yesterday, I wrote an article about the downside potential nailing this drop. This was a perfect prediction based on trend line analysis. In this article, I discussed how the markets kept breaking their 52 week highs by $0.50 on the SPDR S&P 500 ETF (NYSEARCA:SPY), then selling sharply. The downside target I gave was $139.50 - $139.75. That is exactly where the markets sold to today. Read the article here.
In addition to the nice sell off over the last two days, the markets are putting in a bigger top. This top is known as a rounded top and will lead to further downside. It truly amazes me how over the last two weeks the amateur retail investor has been suckered into this market. The media and the Federal Reserve has hyped this market to the point of insanity. Those buying at these levels will be just like those that bought in 1999-2000 and 2007.