THREE GAPS DOMINATE THE SHORT-TERM TREND FOR SPY... It is currently a tale of two markets. The S&P 500 SPDR (SPY) has been trending lower since late May, but the Russell 2000 iShares (IWM) has been trending higher over this same timeframe. The broader market is likely to remain mixed as long as these two diverge. We could see a decent directional move if one joins the other and both trend in the same direction. Chart 1 shows three down gaps defining the short-term downtrend in SPY. Notice that lower highs formed with the second and third gaps, and there was a lower low on June 9th. Lower lows and lower highs define this downtrend with resistance marked in the 211.5-212 area. A move above this level would fill last week's gap and trigger a break above the prior high, thus reversing the short-term downtrend. Note that the fourth gap, today, totally erased last week's surge.
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