Shares of the S & P SPDR ETF (NYSE: SPY) closed Tuesday just above the fault line between new lows and key support.



Chart Courtesy of StockCharts.com

The "W" bottom formed by the S & P 500 (SPX) is now gone. The best the bulls can hope for is a triple bottom and maybe a trading range between 1040 and 1130 for the next few weeks.

And if that happens, swing traders may have a nice opportunity to ply their wares. Otherwise, if the S & P closes below 1040, and does so in convincing fashion, we could be testing the 1020 area or maybe even 1000 on SPX.

A lot could happen to reverse that. But the question is where is it going to come from? Is Washington going to extend the Bush tax cuts? Not likely. Is Congress going to rejigger the way that it appropriates money away from a welfare state to one in which people that work are rewarded? Not in this lifetime.

And is Europe going to like working 40 hours per week, and retire a few years later? Hah! What about the return of old values such as an honest wage for an honest day's work? Again, the answer is no.

What's our point? Unless behavior changes radically at the upper levels of global governments and powerful institutions, we're stuck here for a good while. At least until November, but likely beyond that as well, as gridlock may return, but in this case proves to be useless since something drastic needs to change.

Pimco's "new normal" starts to look a lot like Krugman's "Third Depression" and Roubini's "Double Dip." Call us bearish, because we are. Yet, this is one time when we'd love to be oh so wrong.

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