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S&P 500 Will Continue To Crash, While Direxion Bear 3x ETF Surges

|Includes: BAC, C, FAS, Direxion Daily Financial Bear 3x Shares ETF (FAZ), GS, JPM, QQQ, SPY

With the continued pessimism on economic outlook and future data, there currently sits no better investment on the table other than Direxion Financial Bear 3x ETF (NYSE:FAZ), and the obvious choice, Gold ETF (NYSE:GLD). While numerous reports have surfaced recently that several polled Wall Street analysts forsee a rise of 13% in the S&P 500 by year-end, most of this sentiment is based on wild guesses rather than real facts and figures.We are extremely bullish on the Direxion Financial Bear ETF and believe it could reach $17 in the next couple of weeks, if not days, should the current trend and inflow of negative news continue.

*Click Chart To Enlarge

Just last week, the mainstream U.S. media was praising that the technicals are set for the S&P 500 and other major exchanges to have a meteoric rise, especially with the "renewed" relationship between China's Yuan and the USD. Again the media fueled fire by calling it a "moral victory", yet failed to realize that the Chinese read their headlines as well. Thus, so far, after the inintial first day rise in interest rates, it has continued to fall as the Chinese government continues to hamper any USD gains. More importantly, they are taking advantage of the poor economic conditions in the U.S. to possibly bring about a further demise of the world's superpower, thus whether or not the U.S. celebrated prematurely remains to be seen.

For those who have doubts about the dwindeling U.S. economy, please read our previous articles:

U.S. Media Is Making A Fool Out Of Financial Traders

U.S. Banks Under Fire: Citigroup, Bank Of America, JPMorgan, Goldman Sachs, Interational (NYSE:AIG), Wells Fargo, Morgan Stanley

There is nothing holding the S&P 500 from dropping like a rock in the coming weeks, especially with the current downward Head and Shoulders pattern that has developed. End of January you saw the top of the left shoulder form, with the head coming in May, finalizing with the right shoulder at the end of June. Perhaps one of the strongest indicators that the long-term downward trend has now ensued is the fact that in June, it attempted to break the 50-days moving average on three separate occasions, all of which resulted in failures.

Relative Strength Index (RSI) currently shows that the selling pressure is increasing, and this is mostly due to automatic stop losses continuing to be triggered, with a potential "Flash Crash" on May 6th being relived once again.

Supports currently lie at the 1060 level, with strong resistance at the 1078. The Head and Shoulder's neckline lies at the 1060 level, so once that is broken, there will be no more peaks until the next support, which is estimated to be at the 950-970 range.

MACD divergence and Full Stochastics are all taking a dive as well, which further indicates that the Bears have once again regained control of the market, and will most likely keep it for quite a while.

Disclosure: Long FAZ