For the second time in a month, we have a sharp selloff due to unrest in the Middle East. Both times we went straight down all day and closed poorly, but last time we immediately bounced back over the next couple days and then kept on going. The million-dollar question is whether we can do it again.
There are some major differences this time, such as the potential for significant bloodshed and the fact that an important source of oil is being cut off. In addition, there is significant risk that the unrest will spread to other countries that provide significant oil supplies.
What adds to the difficulty is that this market has had such lopsided action for so long. We have not had any notable consolidation for some time. Even if you aren't worried about the Middle East, you can't look at the technical pattern and not see the potential for further downside. According to the technicians, there just isn't much support, since we went up without any consolidation along the way.