"The S&P below 1,555 - that breaks our bearish model. And when a bubble bursts, you don't get a correction, you get a crisis. And that would be indicated to us if the S&P breaks the 1,555 level from here."
Here's a chart of the S&P 500 going back to the 2009 low. If robot and human traders decide to break 1,550 on the S&P, it would destroy a key uptrend line. But watch the 50 day moving average support level first (1,613 as of today) because, if approached, it could provide the initial short setup for the 1,555 test Zimmermann was talking about. There definitely could be head fakes at the 50dma because it has supported the S&P three times (or four if the recent test counts) since the beginning of 2013.
In the end, if the S&P takes out its 50dma, a volatile trading war could occur between the permabulls and permabears around the 1,550 level (uptrend line support). And if 1,550 breaks, it might start to freak out some permabulls who've been buying the QE-less dip since 2009. But, if you look at the chart, the ultimate uptrend line from the 2009 low hits today around 1,450-1,500, which is technically support; and the 200 day moving average is currently at 1,500, which has supported the market since the beginning of 2012. So, in order for DV to believe that we've officially entered a new cyclical bear market and crisis 2.0 is on its way, traders will need to destroy those two uptrend lines and the 200dma on some random downside catalysts. Walter Zimmermann believes the S&P will plunge 60%+ to 540 by 2016.
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