TECHNICAL VIEW by Gary Dean: We continue to see head fakes in both directions during this topping process. Today started with another massive gap higher open, only to be wiped out and -17 at the lows, only to reverse and see panic buying from the lows into the close. Why? Who knows, but it is fitting for the topping process, where getting short is hard if not patient and getting long means you have to HOPE they gap the markets higher the next day. I read something in zerohedge that was amazing and what I have saying for quite some time: “May has been a terrible month for anyone buying during the US day session. The S&P 500 is up 171 points during the overnight sessions and up 1.3 points during the day session”
Woody has a topping date near the Dates are for members only time period and I expect we could see more shenanigans like today before we completely role over. Smart money/Institutions continue to sell these gap higher opens and the retail specs continue to buy the dips. When the Corona Virus was a non-event and the economy was very strong, I warned about the non-stop gap higher days and said it will end badly. Now we have seen 90% of the gains come from overnight trading, the economy is in a recession/depression, retail specs are the buyers and the smart money/institutions are the sellers. What can go wrong there? As far as the preferred pattern, nothing has changed. We are in a topping process and once wave B is completed, wave C down is pending. Not a member yet? 2 Week Trial Is Only $1.99-See Here
The SPX continues to trade within this bear flag/uptrend tilted channel. There is still a little more room to touch the top, but it should be short lived if the “gap up gang” tries to reach it tomorrow. If history is our guide, we will see some selling hit soon, followed by another touch of the top of the channel, which is up-trending, so a minor new high would fit the profile..and then wave C down should hit. We saw what they did to the “gap up gang” in February, where 2 years of gains was wiped out in 2 weeks. I am NOT expecting a repeat, but it will feel like it to some who are buying in up here. This is NOT a prediction, but don’t be surprised to see a very very large range formed between 3050ish/2200 which last into late 2021. Bearish divergences on the 60’s are expanding! Not a member yet? 2 Week Trial Is Only $1.99-See Here
The 15 minute chart is showing a bearish wedge forming. The bears need to get price below the 2950/2936 support to see momentum pick up on the downside. Until that happens, the retail specs will buy the dips, but they will end up in the panic trade when that trade fails. Unfortunately, they will not realize it has failed until many points below. For tomorrow, 2980 is the first support that needs to be broken and then the 2950/2936 support zone to see selling pick up. Upside 3050/3070 is the resistance zone. Not a member yet? 2 Week Trial Is Only $1.99-See Here
Summary: The “gap up gang” is still around and they have tried to see if the bulls can stand on their own-twice. Yesterday we saw a 60+ gap higher open and then 40 point drop during regular trading hours. Today we saw a 35 point gap higher open, only to get wiped out before reversing back up again-and closing the day strong, but only 13 points higher than the opening tick. It is a topping process that looks to be getting tired. We should start to see some selling soon, but I still expect whatever highs made here to get tested once again into Woody’s topping period. But once that ends, expect to see the 2700-2600-2400 come into play. G
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