The breadth charts for Wednesday morning are bearish overall but showing some interesting divergences after Tuesday’s price action. Price of course dominates today’s discussion and Tuesday’s price action gave us a bottom type signal with a large gap down and run to that 1041 area which was bought hard and price recovered all the way back up to above 1072.
This morning we have a gap opening developing. Bulls would really like to see the gap fade and close maybe testing 1072 or even 1066 before turning around higher. The upside goal today is a close above 1080. A break and hold above 1091 would be even more bullish.
If we can break 1091 then we should be able to run up to 1106 in a very rapid fashion because there is no resistance in between.
Bulls Plan: Hold the gap and break 1091 with a run 1o 1100 (that is a big point day!).
Bears Plan: Fade the gap and close below 1066
Given the hand dealt at open, Tuesday’s victory has to be handed to the bulls even though we only squeaked out green closings on some of the smaller indexes. This market is still very dangerous on the downside and we could be getting some relief only to allow the bears to stock back up. The candle we put in yesterday is often partially retraced even on gap openings. I will be looking for an opportunity after the open to fade the gap. Without some type of retest today it puts some doubt into any bull rally. Most importantly for bulls, this market needs to close on the highs of the day to be taken serious as a thrust day. Most likely we will thrash around in here still for a couple of days before finding the right footing and conditions to thrust higher but in the trading room we have the tools to read the market. A clean thrust indicator setup an we could have a nice trend day up on our hands.
My best guess.. Strong open that begins to fade closes the gap and rallies back to the highs. Or something like that. Still volatile and still dangerous. Watch the levels.
