Bulls Push Their Case That Bears Are Clearly Insane
If you watched the weekend update video on SPY then you already know that I am looking to close my short position for a loss. If that happens, it will be my third hammering in a row and will activate in my in-house stop loss law of no more stock trading for awhile. Nevertheless, to close out my short, bulls have to prove they hold sway over the trend. Specifically, I want to witness the downtrend channel wall resistance broke, the Fibonacci 61.8% retracement level broke, and it has to transpire on good volume.
Volume today was atrocious. Upside volume fell even lower than last Friday. Over the past week of stock trading, we have had oodles of buying going into the closing hour of stock trading. You can see that over the last four trading days, this final hour gush has been getting weaker and weaker.
Now what does the declining volume mean? It implies that fewer and fewer traders are willing to chase stocks higher and buy at these levels. This should give bears self-confidence that bulls can no longer take the market higher and give us the next swing downward.
What is truly interesting is if you study the money flow on the weekly chart. You can make out that we have a bearish divergence concerning the price of SPY and the money flow. We have a like negative divergence back at the end of 2007 that predicted the great move down on SPY from 155 to 70. The money flow is at this time telling us that we will have another large move down.
In this video I perform technical analysis on SPY in three time frames: weekly, daily, and hourly. I demonstrate the reason why I’m still holding my short even though I am down good and feeling the short press that the bulls have had me in since the previous week.
Major economic news coming on Wednesday, July 14th 2010 is Retail Sales. I can definitely see a situation come into being where June Retail Sales are worse than predicted and that could easily hurl the markets lower. It would also give a boost to the case for a double dip recession.