The market liked the October jobs report that came out this morning, so the blow-off run continues (until it doesn’t). We will open with a 20-point gap on inventory that is balanced to net long, with a new overnight high achieved in the Globex session. That usually means a tradable fade at the open, but the word “usually” is rapidly leaving the trading lexicon these days.
There is the potential for early fade per Gap Rules. As always, how the market handles the Gap is good market-generated information for the rest of the day. The former weekly channel top, which sits at the next roundie at 4700, is the only potential resistance above us. Roundies generally provide resistance, too, at least in the short term. And we will blow through the 3-ATR top channel band, a sign of a powerful but equally overbought trend.
But the Weekly Expected Move high at 4675 or so could pull the market back down out of the clouds before options expiration at today’s close. Moreover, we have a discernable five waves completed on the daily chart, perhaps indicating that this first run off the October lows is near completion.
In a blow-off, climactic run, anything is possible. I always wonder who buys at these levels, but people must be required to buy. Either they got short too soon and are covering, or they buy as part of a Gamma spiral. As I pointed out yesterday, the structure below us is rickety, and traders may need a parachute when the market reverses lower.
Recall that the next dip of any significance, something of the 3% to 5% variety, is due in late November / early December. Then the Santa Clause rally comes due. Can anyone say S&P 500 5000? Only time will tell.
My eye is squarely on the Russell 2000 (IWM) for a pullback buy to continue its breakout from a nine-month base. As it is another Friday hugging the expected moves, I will bow out today.
Have a great weekend.
A.F. Thornton