UPDATED: S&P 500 Analysis | Long Term Outlook | Economic End of Days?

See update below.

I want to proposal a "Economic Doomsday" scenario as more of a thought experiment than anything else.  This is a scenario that potentially could unfold based on the current price action and wanted to view this chart with Volume, MACD, and Slow Stochastics to show a technical argument for December 2012 Economic End of Days.  I would highly doubt that the economic powers will let this unfold yet it is interesting nonetheless.

There are 6 key points that will be discussed from the above chart along with supporting evidence from Volume, MACD, and Slow Stochastics.

1. The orange horizontal line is based on March 1994.  This note is combining myth and technical analysis to show that a potential target for a drop could be this orange line (435).  If you look at the intersection of the orange line, red Vertical line (Dec 2012), and the mid line from the Andrew's pitchfork, it seems like a curious coincidence. 
2. Looking at the current retracement in the context of the top (2008) to the bottom (2009), the current move has retraced 76.4% which is a deep but not unheard of correction.  If this does signify the top, a impulsive wave 3 would be expected.
3. This analysis is uses  Andrew's pitchfork which helps track channel lines.  Obviously if this is not the top then the projected path would be incorrect but as stated in point 2, a 76.4% retracement has occurred so looking for a turning point now is likely if the long term bears are still in control.
4. An interesting trend line to watch.  The bulls will have to hold this line if the bears make a run for it. This level sits below all major moving averages (20, 50, 200 month MA) therefore this region should act as significant support on pull backs.  If these levels are sliced through as seen in 2008, limited support remains until 750.  
5. Another interesting trend line as this would technically be considered a neck tie of a 15 year head and shoulders pattern.  It would be impossible for a real head and shoulders pattern to play out as price action would have to drop less than 0 to complete the typical move equal to the distance from the head to neck tie. 
6. As mentioned in point 1, This intersection point seems relatively plausible if major panic selling started taking place.  Another interesting coincidence is from the most recent high a month or so ago to the intersection point 6, is approximately equal to the drop in time and price from peak 2008 to the lows in 2009.

The MACD on a monthly basis looks tired.  It has accomplished to make two strong moves to get above the 0 level however no significant pull back has occurred to reduce the strain on this indicator.
Looking at the Slow Stochastics one of two things are going to happen either the K and D line embed propelling the stock market higher as long as the K and D stay above the 80 level.  If the K like (yellow) falls below the 80 level expect it to head back to the 20 level resulting in a relatively hard sell off also confirming that the momentum has shifted.

I am reluctant to say a top is in, but with the geo-political craziness happening around the Euro Zone, the US debt ceiling, and rising oil prices.

Take this outlook with a grain of salt but know that there are people that consider this view relatively likely, so be wary in the upcoming news, stock market action and currency market.

 UPDATE

 Apparently the trend lines drawn with Andrew's Pitchfork are having some effect on price action.

 The rally today failed precisely at the upper trend channel.  This sharp failure leads me to believe that a decline is imminent.  Short Entry at sub 1300 with a stop at or around 1300 would be a low risk high reward short play.

This post will be updated again with any significant events tomorrow.

Avalon Rare Earth Metals ( TSX : AVL ) | Follow Up - 6.8% pop | Stock Technical and Fundmental Analysis

In a post on Sunday I said " leads  me to believe a turning point is into the works over the next few weeks".  Well we might have just seen that turning point in Avalon Rare Earth Metals ( TSX : AVL ).

  6.8% jump today on 2x average volume.  The 20, 50, and 200 day moving averages were sliced through with relative ease, however, the 50 day ma ultimately held.   The trend line from the recent declining peaks was broken indicating a potential change is trend is likely occurring.  Increasing upside is likely as the MACD breaks above the 0 level indicating a change of medium-term trend in favor of the bulls.
The Slow Stochastic has plenty of room to run, therefore I expect a run to 6.76 at which point there might be some sideways consolidation before another break to the upside.

 On the fundamental side
Avalon Rare Metals Inc. Announces Proposed Public Offering of Common Shares

"TORONTO, ONTARIO, Jul 26, 2011 (MARKETWIRE via COMTEX) -- Avalon Rare Metals Inc. CA:AVL +6.80% AVL -6.02% ("Avalon" or the "Company") announced today that it has filed a preliminary prospectus supplement under its final base shelf prospectus dated May 4, 2011 with the securities regulators in each of the provinces and territories of Canada, other than Quebec, and with the U.S. Securities and Exchange Commission (the "SEC"), pursuant to which the Company proposes to complete an offering of 7.0 million common shares of the Company upon terms to be determined in the context of the market."

Rare Earth Names Rally As GE Briefing Paper Circulates (GE)

"A number of names in the Rare Earth industry are trading higher today, including Avalon Rare Metals (AMEX:AVL) up about 4.5% and Molycorp (NYSE:MCP) up about 5.6%. GE Lighting (NYSE:GE) recently distributed a document entitled "Rare Earth Briefing Paper," which stated that a huge growth in consumption coupled with China's production limits and export quotas have driven Rare Earths prices up dramatically."

Avalon Rare Earth Metals ( TSX : AVL ) | Materials for Clean Technology | Stock Technical and Fundmental Analysis

This is a Weekly Chart of Avalon Rare Earth Metal ( TSX : AVL ).

The stock has retraced 50% of its move and looks like it has down bottomed around that level.
The volume has been diminishing however, last weeks volume was notably higher that the previous few weeks which may be a slight hint of more players stepping into the market shortly.  The MACD has been exaggerated and is reaching the "tipping point" of 0.  Given that the stock is over sold and is finding support at the 50% Fibonacci retracement, which also happens to coincided with the 50 week moving average, it leads  me to believe a turning point is into the works over the next few weeks.  The stock is primed for a nice size bounce.  I recently picked up some September Call Options for $7.00 strike price.

Where will that turning point come? The Daily Chart above shows what might be unfolding.  A break of the trend line holding the stock lower since early April.  The MACD seems to want to pop through the 0 level which would be an indicator of the end of a downtrend.  The key is to pick a position and keep a tight stop at 5.80 ish.  Low risk, minimal downsize, large potential with geopolitics playing such an important role within this space.  Since AVL is a Canadian Company and Property, if quotas continue to be squeezed in the global supply (>90% China) then AVL is poised to become a very stable source of Rare Earth metals for Canada and the US.

Related News Links

Rare earth demand on the rise

"With an increased global focus on the introduction and sustainability of green solutions for economic growth as well as easing pressure on the environment, rare earth metals appear to have become increasingly important."

Rare elements needed for high-tech applications

"Rare earth elements are a collection of 17 elements that are critical for civilian and military high-technology applications. The rare earth elements are scandium, yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium. However, rare earth elements are not really rare. They are distributed globally, with 36 percent of known reserves in China and 13 percent in the United States."

Seagate Blames a "Bubble" In Rare Earth Prices for Causing a Margin Squeeze

"For some time now, rare earth supply, demand, and prices have been hot topics of discussion and debate. While these elements are critical components in many high-tech products, they usually represent a very small part of overall product costs. While the Japanese have clearly been scrambling to reduce their dependence on Chinese exports and to otherwise secure greater supplies, I have never heard a company complain that soaring rare earth prices were materially hurting profit margins, until now."