Thursday, October 6, 2011

Gap Down Filled

Click on Chart to Enlarge

The gap down at $116 is now filled on SPY and the other index ETF's IWM and QQQ. So that target for this rally is met. Thus far the last 2 days of gains have come on progressively declining volume. For a rally to have higher probability of lasting the market should put in an increasing volume up day of 1.7% or greater sometime soon. That is the IBD follow though day guideline.

From a price logic standpoint the last swing down into the low was 5 days. So if this rally exceeds the high of that swing move around 119.50 in 5 days up, then that would be sign of a trend shift in stocks, at least intermediate term. So the market has about 2 and a half more days to accomplish that. In an expanding environment, it is possible that this move up does break that 119.50 high and then fail with a pretty violent leg down.

As long as prices remain below that 119.50 level, if the hourly chart turns down with a bearish MACD cross and a -DI above +DI directional movement signal, I plan on posting a new bearish trade entry. If the rally retraces the recent swing down completely but SLOWER than the downward move, I will still likely post a bearish trade on a reversal sign if there is no follow thorough day by then.

If the market retraces that move faster than it occurred, then I may look to post a long trade on a pullback above support.

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