The stock market has come to be driven almost entirely by technical trading, so we shouldn't be surprised to see that so obvious a trendline as the one shown in the chart below has ruled the action in recent weeks. Between mid-July and early August, the E-Mini S&P has lit upon the support three times, attracting more and more technicians' eyeballs with each successive bounce. By last Friday, it would appear, every one of them was waiting to pounce as the futures zig-zagged their way down from the previous day's spike top. And that's why the futures never got there. Instead, they exploded for huge gains spread over two days, stranding would-be buyers and making shorts wish they'd never been born. It happened again yesterday to a lesser degree when the E-Mini S&P plummeted to within 7 points of the trendline, but then reversed so sharply as to leave bidders choking on fumes. (Click on chart to enlarge) So what might this portend for the near term? Our prediction is that, within the next 5-7 days, it's going to end badly for bulls. We base our dour outlook on the E-Mini S&P's failure to achieve a 1320.25 rally target at the top of last week's diabolical short squeeze. The peak of the move was at 1313.50, but if bulls had really meant business they'd have gone the extra 100 yards to the target that day. If we're right about this, then bounces from the trendline should grow successively weaker, turning a month-long channel formation of highs and lows into a bearish wedge. One of these times, the eager bidders who have staked out the trendline are going to get what they've been wishing for ' in the face. Until then, however, shorts will remain the best friends this market has,
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