Sometimes the overnight markets frustrate me (unless I am in Europe and can get one up on the U.S.). I feel a bit robbed by our Globex cousins this morning, but we are opening with a Navigator algorithm buy signal nonetheless if the market does not immediately reverse. It is usually best to give the market a few hours to confirm the signal when taking the cue before the close. With the large gap higher this morning, it may be difficult to find a good entry point today unless you are willing to ride some volatility in your position over the next few days before profits materialize.
The opening will be a true gap higher, launched from a successful retest of recent lows. Gap rules will apply. It is very positive that we are rising out of a cyclical inflection point in the midst of very negative sentiment and opening above the weekly and daily means. At the same time, we are slammed right up against the downtrend line, making this a tricky buy point, with an initial measured move target of 4460. That is only 50 points higher from here IF that will be the end of the rally.
In the recent past, the market has moved right to the target with short-covering and FOMO. It might still do that, but the character of the market has changed. For example, this is the first time the target has fallen short of the old highs in the past year. My expectation continues to be that this move will form the top of a trading range even if it tags the old high.
We will take a 50% position in the S&P 500 using dips on the hourly charts. In a large gap higher like this today, the market will typically stall in a tight trading range all day, so new positions may require patience to find our entry points, and I will keep you posted.
Initial targets should be the overnight high at 4397.75, then the bottom of the gap at 4406.25, and finally the top of the gap at 4425. As mentioned above, the measured move target is 4460, and then there are about 100 points from there to the old highs.
Stay tuned.
A.F. Thornton