OUR NEW BEARISH PLAY ON THE PROSHARES ULTRA SHORT SP-500 (SDS) IS ALREADY UP TWENTY PERCENT AND COUNTING!

Greetings Bear Rakers, Downside Raiders and Money Makers,

This past week the markets were recovering but ultimately ended to the downside adding some nice open profits to our new bearish positions...

OUR NEW BEARISH PLAY ON THE PROSHARES ULTRA SHORT SP-500 (SDS) IS ALREADY UP TWENTY PERCENT AND COUNTING!

AND OUR OTHER NEW BEARISH POSITION ON THE DIREXION FINANCIAL 3X BEAR (FAZ) IS ALREADY UP A SWEET THIRTY-SIX PERCENT!

Since these are our only open plays right now we're all in profit territory and it looks like the gains on these two play are just getting started based on Friday's very bearish close. Any more downside in the SP-500 or the financial sector and the profits on these two will launch through the roof!

So that's all good news--but what can we add this week to really benefit our portfolios? To help answer that question let's take a good look at...

WHICH WAY THIS MARKET IS HEADED

The SP-500 ended at a new three month closing low just below 1065--you have to go all the way back to early February to find a lower low and before that to November. Friday's close is right at support and it's not surprising we got there considering all the global risk right now--the question traders have to asking themselves is--will support hold this coming week?

Unfortunately resistance at the 200-day was tested multiple times last week and failed every time. Support at 1065 has also held so far--but we've got downside momentum building and increasingly nervous traders so we could easily see a break-down this week.

The Nasdaq was holding above the 200-day until its -83 point drop on Friday. The tech index is still slightly more bullish than the Dow/SPX but only barely. If the SPX falls below Friday's close the Nasdaq will follow--once Apple makes their big new iPhone announcement on Monday all bets are off. Look for a spike higher on AAPL after Job's announcement--immediately followed by a crash in a classic 'sell the news' event.

All thirty stocks on the Dow closed down on Friday marking the lowest finish since February 8th. This close at the lows is also a huge warning sign that we are about to test another level of support, possibly in the 9500 range. The Dow failed multiple times to break back above the 200-day average just like the SP-500.

Friday's plunge came on nearly 11 billion shares of volume after the lowest volume week since early April. We averaged right at 9 billion shares all week until Friday's crash. Here's the tell-tale sign of a bear market--lower volume on the advances and higher volume on the declines. We saw multiple failures at high profile resistance, slowing volume as those resistance levels were hit and spiking volume as stocks broke down.

The big selling catalyst for Friday was the Non-Farms Payroll Report for May. Jobs are critical for a lasting economic recovery and investors carried a lot of hope into this report--estimates were being revised higher right up until the release. Goldman Sachs revised their estimates to 600,000 late in the week and President Obama was bragging in a televised speech about the strong jobs growth expected for May.

Unfortunately out of the 431,000 new jobs reported only 41,000 jobs came from the private sector--all the rest were temporary census works due to be laid off by summer's end.

When estimates for hiring in the private sector ran from 50,000 to 200,000 jobs that's a big whopping miss. Nobody expected less than 50K and almost everyone expected more than 100K. After adding 231,000 private jobs in April and 208,000 in March, 41,000 is a disaster. No wonder the markets sold off.

On top of a really bad total number the average duration of unemployment increased to 34.4 weeks---a new record. Plus a record 46% of unemployed workers have been out of work for more than six months. The number of newly unemployed workers (less than five weeks) increased by 2.75 million to 18.7% of all unemployed workers.

The U6 unemployment rate--which includes those working part time for financial reasons while looking for a new full time job--is now 16.6%. That is the real unemployment number not the often quoted official rate of 9.7%.

If the jobs numbers were not enough to scare investors out the door the new Hungarian government---sworn in less than a week ago---announced they are going to implement a new austerity plan to tackle the countries surprisingly bleak economic situation. The new administration warned it inherited a much worse financial situation than their predecessors had indicated and had found that the economic numbers had been falsified. Ouch--once investors know the books have been cooked it is really hard for a country (or company) to borrow any more money making further financing very difficult.

The new prime minister's spokesman said, "Hungary has only a slim chance of avoiding a Greek-style debt crisis although the administration would act quickly to avoid the Greek path." The Hungarian currency plunged over 2% against the euro and hit a new one-year low. The stock of the country's largest bank fell 11.1%.

The new center-right government won the April elections by a landslide capturing a two-thirds majority and ousting the incumbent socialists. The campaign platform was to boost growth via tax cuts and various economic stimulus measures. This was contrary to the new socialist wealth redistribution programs and tax hikes proposed by the incumbents.

Hungary borrowed money from the IMF and EU in 2008 to avoid a default. As a condition of the loan Hungary was supposed to freeze its deficit at 3.8% of GDP. The new administration claims the corrected numbers show the 2010 deficit to be 4.5% to 4.8% but some analysts are pegging it at more than 5%.

The sudden arrival of Hungary as another potential economic implosion is not such a big deal by itself--but it adds one more warning that unsustainable debt levels are endemic to Europe as a whole. Investors are now rightly wondering when the whole house of cards will fall--we heard about Greece in April, Spain in May and Hungary in June. The list of 'emergency countries' is growing and at some point soon it will be more than France and Germany can handle.

Now EU banks are refusing to lend to each other because of the potential balance sheet problems of owning too much sovereign debt. On Friday the European Central Bank or ECB reported overnight deposits from member banks reached a record 320.4 billion Euros--by far the most since the euro was created in 1999. Those deposits earn 0.25% so the ONLY reason member banks would park cash there is because they are extremely worried about a complete melt-down with massive losses. The ECB warned member banks will have to write off more loans this year than in 2009--the banking crisis is back--it's in the EU--and it's escalating.

A strong rumor surfaced Friday that Societe Generale--the international banking giant head-quartered in Paris--is facing huge derivatives losses. The euro plunged -1.6% on the news although the rumor was quickly denied by "unofficial" sources at SocGen. The company's stock fell -7.6% despite a soothing statement by the company. When asked by CNBC about the rumor a SocGen spokesman said, "If we had something to say, would have already communicated." Sounds like what the banks were saying right before our melt-down back in '08.

The economic calendar for this week is pretty light with the only material event the Fed Beige Book on Wednesday. There was a call by Kansas City Fed President Thomas Hoenig to raise the interest rate to 1% by the end of the summer so the Beige Book will be a key indicator for the June 22nd FOMC meeting.

Dallas Fed President Richard Fisher, St Louis Fed James Bullard and Philly Fed's Charles Plosser have also expressed reservations about the 'extended period' language. Jeffrey Lacker said he was "marginally comfortable" with the phrase and Atlanta Fed President Dennis Lockhart said he backed language promising rates near zero. "Waiting too long is probably less risky than moving too soon." We will hear a lot more of this kind of positioning before the June FOMC and it too will spook investors. Any threat of higher rates in this tenuous environment could be the last nail in this market's coffin.

Considering the events of the past week it is a wonder that we didn't close a lot lower. We had the Gaza peace armada and the blow up over IDF soldiers killing nine people. And in a chilling warning North Korea stated that war could erupt soon. "The present situation of the Korean peninsula is so grave that a war may break out at any moment" according to Ri Jang Gon, deputy ambassador. Plus we had an alarmingly dismal employment report and more bad news out of Europe--the question is...

HOW DO WE MAKE MONEY ON IT?

We've got two new super-high potential trades lined up this week and as you may have guessed--they are both bearish.

The other thing they have in common is they are both on indices or exchange traded funds--one of them goes down if the market goes down and one of them goes up if the market goes down--we'll position ourselves accordingly to profit on any further market weakness.

The bottom line is both of these positions are poised to make us money--a LOT of money--and we'll be jumping in first thing Monday!

We've got a market ready to move and two plays to profit from it--so let's get started...
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