The market needs to rally in the next few days for the summer trend to remain intact. Otherwise, it might be back to the lows.

Yesterday sure seemed like a breakdown below the trend line, but there wasn't much follow-through to the downside today. The next two days could be very telling for the intermediate-term.

Expect news out of Fannie Mae (FNM) and Freddie Mac (FRE), both of which broke down to new lows today. Perhaps news out of these two mortgage giants could serve as the catalyst for the next intermediate-term move in stocks.

One of the key market indicators we follow very closely is the NYSE Bullish Percent ($BPNYA). The indicator has served us extremely well this year, helping to identify the recent rally.

You can read more about the recent set-up courtesy of the bullish percent, and other indicators, by clicking here.

We thought it might be a good time to check-up on the indicator today, after the two day move higher in the broader market.

The BPNYA is moving to near the midpoint of its range, near 50%. This means that the market is sort of at its half-way point, between bearish and bullish extremes. The market isn't overbought, as measured by the bullish percent, which means it could continue to rally.

Today was a big reversal within the short-term upward trend for stocks. The next few days could be critical in determining the direction of the market for the remainder of the summer.

The Bull Case:

From the bullish perspective, the pattern of higher lows is still intact. This pattern will remain intact as long as the S&P 500 ($SPX), for example, stays above 1250. Resistance is clearly at the 1290 level in the SPX.

You can observe similar patterns of higher lows and horizontal resistance levels across other major market averages.

The Bear Case:

A strong case can be made that a bear flag (or bearish wedge) is forming in the SPX and that stocks are about to breakdown into their next leg lower within the bear market. The bear case will gain credence if the SPX breaks its pattern of higher lows by falling below 1250.

The Olympics kick off in a few days. Wouldn't it be funny if the Chinese stock market hit a new 52-week low during the games?

Watch the FXI, which is the iShares China 25 exchange traded funds. The FXI is one of the better and easier ways to trade China.

The FXI is on the verge of breaking down from a bear flag. A close below $43 would do it.

DELL is even for the year. Put another way, it's holding up pretty well.

DELL formed a wide base of support earlier in the year at $19. The stock has since rallied from support and consolidated around $22 to $24. The pattern over the last seven months is a cup and handle.

DELL could easily breakout and trend higher if the broader market stabilizes. A close above $25 would signal a breakout from the cup and handle.