Follow Through But Short-Term Overbought

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The markets made a follow-through type day today and closed above the recent range highs at 1105. The gaps at 1103 and 1115 are now filled. From a charting perspective the market will back and fill gaps before continuing a trend. So this may be expected even in a down trend. However, if the market closes above the gap level we should probably expect a move up to the next resistance level. In this case, the upper bollinger band would be the first target. But the next unfilled gap would be up at 1160 and a swing high at 1147.

The 5 day RSI is overbought now, which is often the most stretched a short-term move will get in a counter trend direction. So if this downtrend continues, I expect it to end here at the 1115 gap fill and overbought RSI.

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There is still no bearish divergence on the hourly chart, but the 30 min chart above does show bearish divergence on today's high. So even if the intermediate trend has shifted to up, I would bet we pretty quickly see a pullback, but maybe not until after Options Expiration this weekend.

Again if an upward flat pattern was forming, today would have been the ideal end point from a time perspective, so maybe this is just the last sucker bait before a major decline. But from an indicator perspective this rally looks just the same to me as the other intermediate lows during this bull market.