The market got hammered Friday, with all of the headlines blaming Egypt for the sell off. While I’m sure that Egypt’s woes didn’t help things, in fact this pullback was way overdue, and Friday’s weaker than expected GDP report didn’t help either.
For some reason, the media always needs to find something to blame heavy selling on, but we’ve been talking about heavy resistance on the S&P at 1305 and it got to 1302 on Thursday. We’ve also been talking about how overbought the market was getting, with absolutely no pessimism out there; generally a recipe for selling.
It’s a lesson in reward to risk, and anyone getting aggressive to the long side earlier in the week paid a price. So, it becomes a matter of putting together all the pieces, and the pieces we were seeing spelled trouble.
Now that the bulls have at least blinked, the bears will have an opportunity to inflict some additional damage. Egypt is already old news; thus it won’t really have anything to do with what’s going on over there. Instead, it will have more to do with key technical indicators, as always, with the market looking forward, not backwards.