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I made a post a few weeks ago about looking at gaps on price charts. The summary is that most significant gaps are retraced (meaning price comes back to the gap point) relatively soon. Also, there should be some expectation of pause or reversal at/around significant gaps.
The chart above shows a chart of SPY (S&P 500 ETF) and shows that the massive gap from last Friday has been retraced now. That coincided with short-term oversold conditions on the model I follow. So far it has led to a little bounce in prices which I would expect.
Now the thing to look for is if this gap holds the next couple days. The short-term model is currently nearing overbought peaks that marked reversal points the last couple weeks. No doubt news about "the bailout" will trump most other factors, but I will be looking to recommend a double inverse ETF trade if the model actually reaches overbought territory.
Realize that SPY has a long way to go before moving above the last short-term overbought high which was last Friday. If it gets overbought before that high is breached, my inclination is to stay bearish for at least one more move lower in the markets.
The chart above shows a chart of SPY (S&P 500 ETF) and shows that the massive gap from last Friday has been retraced now. That coincided with short-term oversold conditions on the model I follow. So far it has led to a little bounce in prices which I would expect.
Now the thing to look for is if this gap holds the next couple days. The short-term model is currently nearing overbought peaks that marked reversal points the last couple weeks. No doubt news about "the bailout" will trump most other factors, but I will be looking to recommend a double inverse ETF trade if the model actually reaches overbought territory.
Realize that SPY has a long way to go before moving above the last short-term overbought high which was last Friday. If it gets overbought before that high is breached, my inclination is to stay bearish for at least one more move lower in the markets.
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