The VIX supports this thesis as well. It is showing striking similarities to the setup that preceded the flash crash in May 2010. In both cases, there was a breakout of a falling wedge, followed by a retest, and then an explosion higher. Notice the positive MACD divergence on both setups. Daily stochastics currently remain near oversold levels, with plenty of room to run higher.
One of the more interesting short setups at the moment I see is the FXI, Chinese ETF. As it has retraced off of it's October 2011 bottom, it has also shown an A-B-C correction higher, but has nicely remained beneath it's resistance trendline, which was it's 2011 support. This chart also shows multiple negative MACD divergences, as well as daily stochastics that is turning down from overbought levels. Short China!
Another excellent chart that I follow is SCCO, Southern Copper Corp. Copper continues to serve as an excellent leading indicator of future market weakness. JJC has retraced just over 50% of it's 2011 fall, as SPX went on to breakthrough it's 2011 high. Taking a look at SCCO, it made a beautiful 61.8 retracement, broke it's uptrendline from the October bottom, backtested the trendline break, and is now falling away.
Below is my longer-term look at SPX and forecast. Who said 2012 wouldn't be a bear's paradise? By 2013 I'm looking for a test of the support trendline connecting the 2002 & 2009 bottoms.