Wednesday, March 16, 2011
Weekly S&P Chart - Flash Crash Part II ?
Looking back to the beginning of 2008 there's only been one other instance where the weekly RSI breached the 70 level. That was in Apr/May 2010.
During the week ending Apr 30, 2010, after reaching a high of 72.62, the weekly RSI dipped back below 70 (the red line in the chart). The very next week the S&P suffered the flash crash (on Thursday, May 6, 2010), quickly losing 10% of it's value.
Fast forward less than a year later and, after hitting a high of 76.17, the weekly has RSI dipped back below the 70 level in an eerily similar fashion just this past week.
While I'm not suggesting we see a similar "flash crash" this week, I do think the chart is warning of a potential selloff in the very near future.
I have been short over the past 2 weeks and added to shorts this afternoon after the market bounced off its lows. If we get a dead cat bounce back to the 1300/1305 area this week I will look to add to short positions again. Above 1305 would force me to reconsider my view.
Posted by Johnny905 at 2:26 AM