Was the overnight selloff on Tuesday a glimpse into the future? (Preview)

By Lawrence G. McMillan

There was wild overnight action during the night session on Tuesday January 7th. S&P futures dropped 54 points immediately after news that Iran had fired missiles at U.S. installations in Iraq. Obviously, prices have recovered since then, but perhaps we can get a glimpse into what might happen should a “real” decline of that magnitude take place.

irst, S&P futures blew right through supposed support and traded down to the equivalent of $SPX 3180. We have been saying that support exists in the 3190-3210 area. Maybe not. There really isn’t much of a support area near 3180 on the $SPX chart itself, but I think we have to consider that there is now – even if it’s an implied support from where futures prices bottomed. (As a point of reference, the March S&P futures – which are the front month – trade at about the same price as $SPX. That is “fair value”)...

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