Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
This market continues to give bears only shreds of light. Even today’s gap down was met with buying after about 75 minutes. Unfortunately that nasty gap was excellent at taking out stops for anyone who is practicing risk management (i.e. tighter stops) in an overbought market. Not only did the broader market gap down below the previous week’s lows (red flag) but many names gapped down and broke their initial supports.
I will start using the chart for the S&P 500 ETF (SPY) since it shows the gaps far better than the index itself at stockcharts.com. (just add a zero at the end of the SPY price and you essentially get the S&P 500 price) You can see the gap down, and how the market has now fought back to even (and slightly above) the lows of last week.
That doesn’t mean it’s an all clear signal, in fact one could argue it could be a nice “gap and fill” before a continued move downward. But thus far you have to give buyers credit – they are quite relentless. And if we continue right back up in ‘teflon’ fashion, the positions stopped out of will look like very bad sells. But process over guessing.
p.s. I’m eyeing that gap from the first day of the year as a natural place for this market to eventually go down and fill. That would still keep the S&P 500 over its 50 day moving average and not crush any of the intermediate term positive structure the market has created of late. Somehow I cannot imagine EVERY piece of economic data later this week falling in perfectly for bulls…
We’ll see how they close ’em.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
