Where is the Stock Market and the U.S. Economy Heading?

US dollar is on a long stretch of a down trend with no end in sight. If it can not hold the line, the currency can fall of a cliff. Not a single day passes and you do not hear about the downside potential of US currency. While weak currency inflates debt away, helps stocks and boost gold prices, the credibility of green back and the reserve currency status will be questioned.

Read the Zero Hedge comments on Citi warning:

"Significant Downside Risk For USD And JPY If Market Begins To Price In Unsustainable Debt Risk"

Major markets continued their sideways action today, and like a coiled snake, everyday this goes on, more and more energy is being stored for the eventual strike.

Whether the cobra bites the bulls or bears is, of course, an unknown; however, Wall Street Sector Selector remains positioned for lower prices ahead.

Today the S&P 500 closed just fractionally below its 50 Day Moving Average, the widely watched indicator that tends to be the demarcation line between bull and bear markets for short to medium term traders.

This week’s soap opera in Washington, D.C. was truly the “theatre of the absurd” as Congress and the President wrangled over an “historic” $39 Billion budget cut that pales sadly in comparison to the $189 Billion deficit that the Federal Government ran up in March alone.

We’ll discuss this in greater detail in a moment, but for today, Wall Street Sector Selector is content with its positions in gold, oil and inverse exchange traded funds and we remain in the defensive mode, anticipating stronger headwinds ahead.

As rebels regained some new grounds in port town, Gadhafi writes a warm letter to Obama calling him “our son” and asking him to stop the operation. His forces are busy bringing oil production in eastern Libya to a halt. Hillary say no the request.

This week major indexes stopped at major resistance, so once again, we find ourselves on the “knife’s edge, a precarious balance between going higher and falling off the cliff.

On My Radar

In the chart of the S&P 500 below, we can see how price stopped at 1332 which is exactly the resistance level at the top of the most recent columns of Xs and Os, and we see that we’re still in “bearish” mode with a price objective of 1160.

A move higher to challenge the 1340 level would indicate a breakout to higher prices while support is at the 1250 level.

US arms the rebels to attack the Gadhafi’s forces, at the same time attacks the Al Qaeda who are among Libya's rebels. What a great strategy! We are destined to win on both sides!

Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip – but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.