The whole world has begun acting as though the period from late 2007 to early 2009 never happened. For one thing, financial newsletter writers are currently MORE bullish than they've been since October 2007 (the absolute peak in stocks). Similarly, the American Association of Individual Investors survey shows only 23% of individual investors are bears, while 49% are bulls: an HIGHLY slanted view.

On top of this the VIX (a measure of investor sentiment) shows complacency at PRE-2008 levels. Again, it's as though the Financial Crisis never happened. The markets have completely forgotten it. The whole AIG situation? Completely overblown. Fannie and Freddie nationalized? Not a problem. The big banks begging for handouts so they don't all disappear? That was all based on a dare. They didn't REALLY need the money.

The only problem with all of this is that this current stock market is neither healthy NOR normal. In fact, it's like a market from another planet. Indeed, according to Robert McHugh, a famed technical analyst, 80% of the market gains occurring since March 2009 have come on just 30 Mondays. Put another way, you could have bought stocks on Friday afternoon, sold them on Monday at noon, and ignored the rest of the week and roughly mirrored the S&P 500's blistering performance.

Tyler of Zero Hedge also points out that the market actually hasn't produced a gain since September during the 9:30-4PM trading session. Instead ALL and I mean ALL of the gains produced between that time and year-end occurred during the overnight session in the futures markets:

Of course, neither of the above indicate a healthy bull market where investors in increasing numbers buy into the rally. Instead, they both reek of manipulation.

And yet investors are bullish, confident, AND complacent. Except for corporate insiders of course. They're selling as much stock as they possibly can: $62 in sales for every $1 in purchases to be specific. By the way, this includes guys like Bill Gates and Warren Buffett.

So let's take a look at what the REAL stock market is doing today.

I realize that to most investors, the S&P 500 appears to be breaking to new highs giving further evidence we're in a new bull market. However, when you remove the Fed's primary liquidity tools (Dollar devaluation) from the picture, a very, VERY different market is appearing. Indeed, priced in Gold, stocks have failed to make new highs and in fact have made a new lower high.

As you can see, priced in Gold the S&P 500 actually peaked in AUGUST, collapsed for three months, and then staged a bounce in December. What's critical to note is that the bounce FAILED to make a new high. In fact, the latest high is in fact a lower high from that of October (the last bounce). From a technical perspective this is VERY negative, indicating that the market's upward momentum (as priced in Gold) has been broken.

The picture is even uglier from a larger perspective:

As you can see, stocks (priced in Gold) are literally on the cusp of a MASSIVE multi-year support/ resistance line. Inded, this is THE line that marked MAJOR inflection points for the market throughout the financial Crisis: stocks bounced off of it three times during the nightmare of Fall '08. They then broke below it into the abyss of 1Q09.

This is also the line that stocks struggled to break above during the rally started in March '09. Indeed, stocks priced in gold didn't break above this level until July of last year. They quickly ran into overhead resistance and then fell back below the line in November.

Finally, the bounce in December (precipitated by the collapse in Gold rather than any REAL rally in stocks) brought stocks above this line in December '09. Today, as I write this, stocks are re-testing the line.

I realize that the above analysis might be difficult to follow. The main point I am trying to make is this: stocks priced in REAL money (Gold) are showing MASSIVE weakness falling to test a critical level. IF they break down from here it means Gold will be outperforming stocks again. If they bounce here it means stocks are still outperforming Gold.

Remember, this is not necessarily a univeral trend: it is a relative one. Gold could actually outperform stocks WHILE falling (stocks fall even further). Similarly, stocks could outperform Gold by falling (Gold falls even further).

Thus, the above line indicates any of the following is possible:

• gold continues to fall but stocks fall even MORE
• gold rebounds, outperforming stocks, but stocks hold up relatively well
• gold continues to fall but stocks hold up or even rally
• gold falls AND stocks fall but stocks fall less

Thus, there are quite a few outcomes that could happen. In order to ascertain what is to be the likely outcome, we need to consider how stocks and gold individually are performing.

Gold has essentially been correcting for over a month now. In fact, to me the precious metal looks to have broken its uptrend which is now acting as resistance.

In plains terms, if Gold DOESN'T break above this line in a BIG way soon, we're likely to see much greater losses in the precious metal (Gold falls).

Stocks, on the other hand, look to be overextended from their 20-, 50-, and 200-DMAs. In plains terms, it looks like stocks are primed for a brief correction or at least a period of consolidation. Indeed, we need to see a definitive break below the 50-DMA (1,098) before we're likely to see any real fireworks to the downside.

Thus, it seems likely that stocks will outperform Gold in the near-term (meaning the S&P 500 priced in Gold will bounce off the key line). This means that:

• Gold falls, but stocks hold up
• Gold falls, but stocks rally
• Stocks AND Gold fall, but stocks fall less
• Gold rallies, but stocks rally MORE

Given that Gold is in a corrective mode, I expect we'll see Gold fall and stocks hold on or possibly grind a littler higher. However, even stocks are beginning to show major signs of duress. I'll detail them in Monday essay. Until then…