We shall soon see if the stock market survives its resistance test this week. If it does not, it will coincide with Martin Armstrong's recent call for the middle of June. Either way though, the bankers will be on the insider side of the market to reap their usual mega profits.

Venture Exchange barely able to stay above the 2,000 level after several days of controlled naked shorting.

Regards - VHF

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Tip Sheet Tuesday: Kiss The Line and Then Good-Bye!

Graham Summers

June 7, 2011

No investment goes straight down or straight up. This is especially true when an investment is changing trends from bullish to bearish and breaks below a key support level.

Instead, investments follow what I call the “kiss the line then say goodbye” pattern. That pattern is:

1) The initial drop

2) The re-test (kiss)

3) Good-bye!

In plain terms, this means that once an investment breaks below key support, it usually rallies to re-test that former support line. If it is rejected at that line (indicating support is now resistance) then you are in for a sharper correction.

Which is exactly what’s happening in stocks today:

As you can see, the S&P 500 has taken out critical support at 1,300 or so. It’s now staging a bounce to re-test this line. If it’s rejected here, (meaning former support is now resistance) then we’re going to see a sharp correction to 1,260 or even 1,200 depending on how bad things get.

So pay close attention to that line. If the S&P 500 kisses it and doesn’t break back above… then say GOOD-BYE!

Indeed, I believe things are about to get REALLY ugly.

The US economy has taken a sharp turn for the worse in the last three months. Considering that we never had a recovery to begin with, I believe we’re heading into a very, VERY rough patch here in the US.

Without adjustments, the US economy LOST (not gained) over 100,000 jobs in April. Nearly 30% of all mortgages in the US have negative equity. Food prices are through the roof. And we’re actively raiding pension funds in order to fund debt issuance.

In plain terms, this is an absolute disaster. And as usual, stocks are the last to “get it.”