After an impressive recovery yesterday, the markets opened nicely higher today. These light volume floats in the market are normal in 2012 and have helped keep stocks near their 52 week highs. However, major technical issues are showing themselves and downside looks unavoidable.
After the markets opened higher, a reversal took place. The selling has continued into the lunch hour which is a change in character. The key to the top on this market was a hit of the $133.30 level on the SPDR S&P 500 ETF (NYSEARCA:SPY). This level was a major gap fill from July. Even more importantly, if you connect the highs from 2007 and 2011, the trend line runs directly into the $133.30 level. Note the chart below.
If these reasons mentioned above were not good enough, CNBC has been pumping a golden cross on the daily chart as a signal the markets were going to surge higher. Taking the contrary view, which everyone should do when dealing with any media outlet that hypes the market, it was a sell signal.
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Chief Market Strategist