"No warning can save people determined to grow suddently rich" - Lord Overstone

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The State of the Trend

We've mentioned several times that putting the infinity of QE in doubt will make it harder and harder for the FED to keep all the plates spinning in the air. The true test of that assumption will come in the next several weeks. So far, as we concluded in our last article, the markets have been closely following their seasonal patterns. That was confirmed one more time as all the major indices declined sharply into the projected weakest summer time frame:

SPY Chart

The question now, however, is whether they will continue to do so and trade more or less in a trading range until the end of Summer, or continue their slide on fears that the FED will start tapering QE soon, that China liquidity is drying, and its economy is slowing down, etc.

Luckily, there's not much guess work involved. If the bulls manage to pull and keep the SPX above or close to the 2007 high, then chances are that the seasonal pattern is prevailing. Otherwise, a decline similar to previous declines from the top of the weekly channel points to support levels at 1566, 1536, 1466 and 1386:

S&P500 Weekly Chart
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