Is market going to break wide open this summer?

After more than two years of bear market low of 2009, the case is finally ripe for a significant market break this summer. Although I am not in the business of making market predictions, the dangerous signs are lining up and you should expect a perfect storm soon ...

Although the market indices, Nasdaq, NYSE, SP500 are lingering near the 3 year recovery high, the underlying conditions are not printing a bullish tape and some of them are outright bearish.

First of all, metals and commodities have rolled over. Metals, especially copper, usually lead market higher in recovery phase, and top ahead of the big board in anticipation of economic slow down. Copper peaked in February, which has since seen nothing but distribution. Copper has corrected 15% from Feb high, its correction has no signs to end soon. The climax run on Silver is another sign the commodity run for the intermediate term is over. The sharp run up of the silver and brutal sell off at the end of the April is a text book classic of the climax top, which usually takes months, if not years to recover in the chart world.

Secondly, the growth stocks, which always lead the market cycles are showing signs of topping out. One by one, growth stocks are rolling over, AAPL, BIDU, SINA, OPEN, FFIV, RVBD, SWKS, AAPL, GOOG. The few remaining ones such as PCLN, NFLX are all in late stage bases showing no constructive chart patterns.

Thirdly, defensive industries and sectors are leading the market which usually coincide with the market correction. Medicals, drug, health care, diversified services, chemicals are dominating the top ranked industry groups.

Market sentiment is also painting a bleak picture showing Bull/Bear ratio of 51%/18% in Investor's Intelligence survey, which is a remarkable contrast to Sept 2010, where bull/bear ratio is 40% bears to 30% bull.

History shows the third year of the bull market is usually choppy and difficult. Needless to say the uncertainty in this summer is already paramount: the end of QE2, the slowing of emerging economy, the possibility of restructuring of Greece debt, and incoming political battle on US debt ceiling.

Is market going to break wide open this summer? signs are painting a bleak picture.