The Week Ahead: Another Scare Like 2010, 2011, and 2012?

t was another rough week for the markets as the heavy selling came as the average investor was trying to digest the significance of the market rigging headline that I discussed last time. The selling hit panic levels on Thursday, but it is too early yet to conclude that the decline is already close to being over.

The technical picture last Wednesday allowed for two scenarios and, as of Friday, there is not enough evidence to be confident whether the large-cap Spyder Trust (SPY) and SPDR Dow Industrials (DIA) are going to join the Powershares QQQ Trust (QQQ) on the downside.

The plunge in the technology and biotechnology stocks is being tied to the perception that the economy is not strong enough to support the current high stock prices. This view is not really supported by the current numbers, as past market declines in this bull market have come in conjunction with much softer numbers than we are seeing now.

The current environment does remind me of the panic sell-offs that occurred in 2010, 2011, and 2012. I have circled these periods on the weekly close only chart of the S&P. For example, on August 27, 2010, there was this Bloomberg headline “El-Erian Says `Alarming’ Data Show U.S. Economy Slowing.”

The S&P 500 had actually made its low in early July 2010, but had a secondary low at 1039, the day this article was published. Below the chart of the S&P 5000 is a chart of the S&P 500 Advance/Decline line which reveals that it had made a new high the prior April (point 1) . By February of 2011, the S&P 500 had risen to 1344.

The Week Ahead: Another Scare Like 2010, 2011, and 2012?

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