In the Morning Outlook for Day Traders yesterday, we pointed out that there would be a true gap, and gap rules would apply. A true gap is a gap where the market opens above the previous trading day’s high. This is much more meaningful than merely opening above the previous day’s closing price. When I use key industry terms, I often highlight them to click and go to a glossary – especially when I invoke trading rules. Look for highlights when you don’t understand or may forget the rules.

Sometimes, the software is difficult to work with. I am usually in a hurry to get the information out to you before the morning opens, but with as much of the overnight data under our belt as possible to give an accurate assessment of the day ahead. It does not hurt to check back about 30-minutes after the open to find corrections, links, and typos cleaned up on the Morning Market Outlook for Day Traders. The timeliness of the information takes precedence over minor typos.

Even though I have created algorithms that give me extraordinary guidance in making both short-term and long-term investment decisions, Jim Dalton (JimDaltonTrading.com) (now 80-years-old and an industry legend) taught me the importance of “thinking” as a young trader. What does the market-generated information objectively tell us about the market? What is the market doing – what is the general tone and bias? What is the market trying to do? How successfully is it accomplishing the goal?

Yesterday was a great example of a gap and go – the application of Gap Rule #1. This behavior communicated how strong the markets, especially the NASDAQ 100, truly were yesterday. We now carry that narrative forward with us today.

A couple of caveats are in order from yesterday, however. Many overseas markets were closed for Easter (our previous night and half the day). Accordingly, yesterday’s volume was light. Perhaps more importantly, the bond market was quiet without the overseas participants, so bonds and rates did not interfere with the U.S. climb. I also carry that narrative forward. 

Yesterday still counts as positive bias, but perhaps not as much as a day with full participation by all global market participants. International perspectives about our debt, spending, and interest rates are quite different than the domestic front. Interest rates are front and center lately.

Put yesterday’s action in both the S&P 500 and most notably in the NASDAQ 100 as samples of Gap and Go days to refresh your memory periodically. Also, note the behavior when the S&P 500 Index tagged the Weekly Expected Move high. It danced there for the rest of the day.

A.F. Thornton