Market Review 7/25 Short Rally May Start, But the Bears are in the Drivers Seat

I would not call today's price action a boost of confident for the bulls.  Even though I believe that the bulls are about to put a small rally together that is eventually fall short.  The break yesterday in the SPY was significant in the sense that volume was involved and though the volume was slightly down today the even to watch for is if the market rallies and starts top are we going to see spikes in selling.

A spike in selling volume is a precursor to a move down, and I believe that there are European headwinds that no matter how good companies earnings are here in the U.S. or even if QE3 is begun that the sickness that is European debt Crisis is going to begin to move us down.  After all the market from Friday till Tuesday wasn't real encouraged by news coming from across the pond so much so that we had 3 days of triple digit decline.

I think what I see playing out over the next few weeks is on the SPY we are most likely to see a small rally and we will start to test the bottom part of that trend-line.  The trend-line will hold as it did in May and then institutions will join in and we will see a similar move as we did in the second half of May.  I am not exactly sure how big, but it could test $130 and lower.



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