Technical Stock Analysis On SPY 7-8-2010

Bulls were amazing today, were they not? Reverence and props to the bulls today, they warrant it.

Let us remember though, one day does not a market create. Ask yourself a question, is it probable for 1 day to cancel out 2 months worth of stock trading? Of course not, that's silly.

We are still operating below a Bearish Head and Shoulders Top. In fact, on the weekly chart, bulls have not even taken the market up a sufficient amount to test the neckline resistance so far. Worse, yesterday we just had a Burial Cross of the 50 day moving average breaking below the 200 day moving average. In other words, today's stock market action is nothing more than a recoil inside a larger downtrend until proved otherwise.

Commit to memory, the trend is your friend and the trend is still down. Stock trade with the trend.

I am always dumbfounded at how a lot of stock traders will get frightened out of their short positions because of one day like on today's chart. At times stock trading is hard like it is today. You have to burrow your heals in and say, I will not get petrified out of my short position until the market says that I should. As long as vital resistance levels have still not been taken out, this stock market is in a downtrend. While the stock market is technically in a downtrend, I will not get petrified out of my short position.

You will realize that if you have the self-control to stick to your stock trading system, you will get 70% of your calls right. The challenge is to be able to stick with your stock trading system when the market goes in opposition to you. The test is to have no predisposition, no optimistic partiality and no negative predisposition. The logic for why I am taking the short side of this market is not because of politics, not because I'm a gold bug, and not because I'm a want to be economist attempting to forecast the future. I am short this stock market because technical analysis tells me from an unbiased point of view that this market is in a downtrend. I'll be long this market when technical analysis tells me the market is in an uptrend. No emotion. No allegiance. No preconceived notion.

In the video below I will update you on the S&P 500 and make clear why I gamble this market is still in a downtrend.