The pullback in the S&P 500 Depository Receipts (AMEX: SPY) from 84.80 to 81.30 since Monday has coincided with the recovery rally in the ProShares Single Leveraged Short SPY (NYSE: SH) from 73.00 to 76.00, which also happens to have filled the down-gap left behind last Thursday. Classic technical behavior would argue for the SH now to decline after having filled the gap. If such a scenario unfolds, then the SH should press back into the 74.00-73.80 area, which would imply a climb towards 84.00 in the SPY concurrently. We maintain a long position in the SH in our model portfolio as a partial hedge against an implosion in our long positions.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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