Not unusual to see the 21ma get close to the 50ma, just prior to the next big sell wave. The 200R also looks like a typical top of a countertrend rally.
The economy is not in terrible shape and any recession from here is quite limited, by the already collapsed housing and jobs market. Not much inventory to get rid of either.
But external events, such as the ongoing China collapse and the tossing of PIIGS to their ignomious sovereign defaults, will take a lot ouf the US economy and hit the already precarious banking sector.
So what's likely on the way is more of an economic freeze than a recession.
Very positive getting over the 50ma. Not to get too bullish, because it doesn't seem warranted, but the downward sloping range top may be doable from here.
I don't think bailing out the EU banks solves the PIIGS default issue, but it certainly shows some political fortitude, which has so far been lacking.
The EU is proof of why the US Federalist system is much better. When was the last time the Governor of Alabama had any say over the economic future of Maine?
The key to this system is that the states must run balanced budget, with all the deficit spending rolled up to the Federal level.
In any case, the range top now seems good to go, unless this is the set up for an inverse H&S bottom. To me that would be way too bullish, but if so then we'd get an 1100 S&P test, then a HUGE rally into next year.
The economy doesn't seem to justify big moves in either direction. It all seems to be about sovereign default risk and the ongoing Chinese collapse.
Merkel and Sarkozy just announced that the Greek situation will be resolved by the end of the month. The plan is to protect the banks with some free capital, and let Greece default.
That of course does not protect US banks.
Greece sets the precedent for Portugal Italy, Spain, Ireland and eventually French default. Its just hard to work an F into PIIGS.
China is in a state of economic collapse and the bubble there is arguably too large for even the central government to correct. Likely we've seeing the peak, like what happened in Japan in 1987. It's been downhill ever since for Japan, and if anything China has even worse demographics.
The gold rush for cheap Chinese labor is essentially done, with many heavy industries starting to move on to cheaper labor countries. China can probably move up the value chain, but that will cause much of the population to return to poverty.
That's all a bit longer term, but in the short term, I think the market is perfectly set up to crash.