Good Morning:

Gap rules are in play this morning, and the following comments apply to both the NASDAQ 100 and S&P 500 indexes. Due to the true gaps breaking out of recent range, there will be some shock and awe at the open, which opens up the potential to trade sooner rather than later. Market makers could pile on to buying futures, believing that the indexes will close above tomorrow’s expected move highs. Current prices have come off from the overnight high but that might also put a damper on an early fade. 

Regardless, target the top of the recent ranges as the first line of support. We need to monitor for acceptance and continuation above these levels. in this crazy, bullish environment, I would expect any move to the balance area range high to be a buy.

Should we find acceptance back within balance, there will be potential to move to the opposing end of balance as per gap rules. Only a move below the balance area low has the potential to change the tone. I see the odds of this as low, but the smart play always prepares for every outcome.

Any gap and go scenario should be characterized by powerful internals, a failure to fill the gap, a partial gap, or a swift rejection after a recent highs test. Monitor for continuation and keep gap rules #2 and #4 in mind.