Can Bulls Continue To Screw Bears

If you watched the weekend update video on SPY then you by now know that I am ready to close my short position for a loss. Provided that happens, it will be my third loss back to back and will kick in my internal stop loss rule of no more stock trading for awhile. Though, to close out my short, bulls have to show they control the trend. In particular, I need to witness the downtrend channel wall resistance taken out, the Fibonacci 61.8% retracement level taken out, and it has to occur on good volume.

Volume on today's chart was horrific. Upside volume fell even lower than last Friday. Over the previous week of trading, we have had a lot of buying going into the final hour of trading. You can see that over the last four trading days, this final hour spike has been getting weaker and weaker.

Hence what does the diminishing volume signify? It means that fewer and fewer investors are ready to chase stocks higher and buy at these levels. This should give bears assurance that bulls can no longer take the market higher and give us the next swing downhill.

Something that is exceedingly remarkable is if you look at 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 forecast the big move down on SPY from 155 to 70. The money flow is currently telling us that we will have another good move down.

In this episode I execute technical analysis on SPY in three time frames: weekly, daily, and hourly. I explain to you why I am still holding my short even though I'm down big and feeling the short squeeze that the bulls have had me in ever since last week.

Important economic news coming on Wednesday, July 14th 2010 is Retail Sales. I can definitely see a situation happen where June Retail Sales are worse than predicted and that might with no trouble send the markets lower. It would also give a boost to the case for a double dip recession.