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S&P 500 Puts in a Nasty Head and Shoulders Top

|Includes: SPDR S&P 500 Trust ETF (SPY)

OK, so I don’t really open beer bottles with my teeth and do my own tattoos. But my call that the “golden cross” in the S&P 500 on June 23 was a bogus one turned out to be a bulls eye (see my report), and the abuse I piled on the analysts who predicted an upside breakout was richly deserved. I have kept a laser like focus on the real technical picture that has been unfolding for the last two weeks, that of a bearish head and shoulders top. David Fry nicely does the scut work on technical matters for me though his excellent  ETF Digest blog. His chart and comments below are about to force us all to become historians, for it is setting up a perfect replay of 1937. That was when Roosevelt buckled under pressure from conservatives disgusted with four years of record government spending and groundbreaking social programs, and balanced the budget, igniting the second down leg of the Great Depression. It is no coincidence that both Chair of the Council of Economic Advisors, Christine Romer, and Fed Governor, Ben Bernanke, are authorities on this era. Thanks to Thursday’s diabolical employment numbers, Mr. Market is now telling us that a “W” recession and the second stimulus package it will demand are on the table. There is room for a short play here on US stocks. Look at the ProShares Ultra short S&P 500 (NYSEARCA:SDS), which is down 54% since March 9, and is overdue for a rebound. It will give you a nice 200% short position in a falling market. Please pass the church key.