SPY, the monster S&P 500 ETF, took a look at 212.5 again today and held that support in late day trading. A couple of weeks ago it was doing that repeatedly.
My guess it will bounce a bit from here but the question is how high and what after that?
If it does not run right back up to the top of the recent range there is a likelihood that the steep decline market bears have so long been waiting for will be at hand.
The confounding thing about the general market in the past three months has been how many fundamental and technical indications have dropped into place that bear similarities to the market tops in 2000 and 2007 but the price drop has not gotten going in earnest.
For instance, monthly NYSE margin debt has clicked down again in a massive divergence to the market’s high level sideways move. Breadth in general has been declining despite price index defiance. It could be only the Fed, with an eye on the election, is holding the market up.
If today’s rip to the downside, on the other hand, is the shot that cripples the lumbering ship, 208 on SPY could be seen in a hurry, and 200 eventually would not be out of the question.
This is one of those times when long-term investors better sit up and take notice. Decide how much of the current gain one is willing to lose and stick to it. If there is a sell-off (for the rest of year?), the signs it is, once again, not different this time have been obvious for some time.
(right click on the chart for a larger view)