Swing Trader

Good morning traders. As mentioned above, yesterday’s poor profile structure is a clue that Tuesday’s rally consisted mostly of short covering. The chart below is more evidence.

The red circles highlight the divergence between the closing price of the S&P 500 Index (SPY, red line) and our proprietary measure of broad market money flow (MF, blue line).

This is a clear signal that any buying going on yesterday was not only short covering, but potentially trapped longs taking advantage of the rally to sell stocks.

Whatever the reason, continuation higher by the broad market will be short lived if this money flow condition persists.