Downward Spiral Ahead?

The markets have been in a state of shock since the lastest selloff from a couple of weeks ago. We have seen most sectors and groups get hit pretty hard recently and the future doesn't look well at all.

Take a look at the SPYs chart above. The recent downturn has caused a waterfall effect in that everyone is taking profits since from the multi-year rally. It has caused much capitulation that the SPY broke major support levels, mainly Trend B (sea green trend line above). One of the most important aspects of this downturn is the white box. Price action has driven to data points below the lower Bollinger Band! This is important for the future of the markets because it signifies that there is lower prices ahead. More recently (in the yellow oval), you will see that the price has seen a resistance level. I believe this is the point at which either slow money is still unloading positions and more importantly, smart money is shorting.

With this said, you will notice a white trend line around the 130-131 level. This is the next major support level for a longer term perspective of where the market is headed. But before we hit that level, it will be interesting to see how the market reacts around the 132.77 level , a resistance level of May 8-9, 2006.  ¶ 1:59:00 PM