I'm leaning bearish for the rest of the year, though very much with an open mind that it could go the other way. One thing I've been watching and writing about as very important for the bear case for the remainder of 2012 is what's happening on TLT. Major support is at 123.5 to 124, and that was tested last Thursday. TLT bounced there, formed an IHS that never broke up, and then retested the lows yesterday. If we are to see a resumption of the uptrend on bonds, this is the likely place to see that happen. If support fails however then TLT will most likely fall considerably further (targets on the chart below), and that will give a considerable following wind to equity bulls. The strength of this support level is best seen on the 60min chart:
Trendline support from the late July low is in the 1387 area. A break below 1395.62 SPX would trigger a short term double-top target in the 1381 area, with the middle daily bollinger band in the 1380 area. A break below 1380 opens up a test of SPX rising channel support and the 100 DMA in the 1360 area. A break below those would greatly strengthen the case for a test of the June lows.
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