Recovery Rally in S&P 500 Short ETF

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.