Summer of regret, or opportunity?

We continue to await the final direction of this market. The SPX seemed to attempt a defense of 1040 last week by holding around the 1080 level, but it seemed to involve a lot of selling.

SPX daily chart

And when you input "weekly" as the time frame, you'll see that 6 out of the past 9 weeks, including last week, involved more selling than buying. This would seem to be a clear sign of major distribution (selling) into rallies. And even going back to the point where the April was made, we can see that it happened on mediocre buying pressure that was overshadowed by previous, and later, selling. That's not normal and was suggestive of a head-fake rally in April.

And pay particular attention to how many weeks passed in that move up to the April high, and how quickly it moved down (11 weeks to move from 1050 to 1217, while it took 4 weeks to move back down to 1050 FROM 1217). Any move that effectively erases the previous gains in a far shorter time is bearish. (btw, I'm not even counting the "flash crash" low, which would have wiped out all of those gains within a week).

That means that selling pressure is MUCH STRONGER than buying pressure.

Summer Rally or Summer Slump?!

Near term market scenarios

So how do we know which way the market goes? We don't. But I suggest that sometime next week we're going to get a better idea of where it's heading. If it involves an ACTUAL retest of 1040-1050, that could set us up for a summer rally. Break down below it and the SPX is heading towards 950, and then possibly 800.

Again.. I want to be bullish, but I'm not seeing any reason to be at this point. Some tremendous technical damage has been done by the 2008 crash and it's going to take time to work that out, even assuming we don't fall back into a double-dip recession (depression).

Here's some more stuff to digest regarding the ultimate direction of the market:

13 Signs The US Economy Has Hit A Brick Wall.

Why The U.S. Will Never Have A Balanced Budget Again.

And watch what going on with China, and especially the Shanghai markets. It represents actual manufacturing expectations far more than the Hang Seng (Hong Kong) market. It's been losing value consistent for weeks now, and it's down another half a percent this morning.

Shanghai index

Shanghai market chart

Very disturbing reading, wouldn't you say?

Of course, many other countries like Japan and Europe are in the very same boat. But the USD is the global reserve currency and if the investing community loses confidence in it's ability to act as a storehouse of value, we're screwed.

Scrutinizer