S&P in a world of trouble?

I hope to make this brief but there is a lot to say on the markets.  The Bulls were banking on Q2 earning to boost the market, however there has been a mixed bag of earning lately and thus has been quite bearish.  In addition to this, the debt crisis has not gone anywhere.  You can't have a healthily stock market when banks can't lend money to business and cities, states, countries are facing potential default (i know these can't technically default since they are not considered corporations but they will still require rescuing).

So S&P and every other major market took a dive on Friday.  Before I look at the current picture lets go back 2 years on a daily, to see where we are currently.

 
First I would like to make a note of the Fib retractment I have setup.  The retracement is projected from the recent high to the current low that happened a couple weeks back.  Look how perfectly the fib retractment fits this graph.  With the 161.8%  and 261.8% level matching up with strong resistance and support lines.
Also note where the S&P is, if it breaks that 100% retracement without finding sufficient support, it is not far fetched to say that the S&P is heading down to the 875 level (161.8 retracement) if not to the 675 level.

just looking at this graph it is hard to be a bull in this market place. As it is pretty clear that we are rolling over, and have made lower highs and lower lows over the past 2 months.

The next chart is a daily on a recent history with some indicators on it.

Lets note that the market is still over bought with the Slow Stoch at 84.25.  Look what happened last time it was in this situation, a strong downtrend.

Most interesting is that the volume is higher than any bull day in the previous uptrend.

The trading channel is quite defined in light blue, if that channel gets broken to the downside along with the 100% retracement level, this market will be in really bad shape.

The most bearish part of this chart is that the sell off closed below the last MA support level the 20 day.  Which virtually guarantees that a test of that 100% retracement will occur.  This also provides an amazing tight stop-loss location at 1075 ish, if the index closes above this that would be good news for the bulls.

Playing this index you could use HIU (horizon beta pro, S&P 500 inverse ETF). Friday's price action resulted in a bullish engulfing candle stick pattern. The close of this ETF is at $10 flat, and ended at the 20 day MA and the 38.2% retractment on the recent highs and lows. This again provides an excellent stop loss support level.  I will continue to update the progress of this market.