We are in a very news sensitive environment. However, the long term trend is still UP as shown by the monthly chart below. The October lows of 1640 marked a 5% correction off the all time highs. Friday's rally took out last week's high turning the weekly trend back to the upside. Acceptance back above the 1700 level targets the leg hi at 1726.75 which was made in the overnight session.
Wednesday's auction marked an Excess Low followed by a large Gap up on Thursday. Gaps are frequently the precursor of a more significant, directional auction. An Excess Low followed by a Gap is the most potent combination for a reversal - when observing a multiple day auction. Assuming more positive news on Govt. shutdown and debt ceiling talks I expect the trend to continue.
Lets look at the Profiles next. The profiles for the last 2 days are very stretched out with multiple distributions. The shape of the profiles suggest that a lot of traders were caught short at the lows. The positive news out of Washington had a lot of momentum traders pile on to the short term rally. Any indication of the talks in D.C. stalling could easily reverse some of the gains we have seen in the last 2 days. For Monday - I will observe whether we open in or out of Balance relative to the upper distribution from Friday. After a large move up I expect the market may Balance. My focus will be on developing Value.The 1691-92 level is key - acceptance below that level targets Friday's lows.
Wednesday's auction marked an Excess Low followed by a large Gap up on Thursday. Gaps are frequently the precursor of a more significant, directional auction. An Excess Low followed by a Gap is the most potent combination for a reversal - when observing a multiple day auction. Assuming more positive news on Govt. shutdown and debt ceiling talks I expect the trend to continue.
Lets look at the Profiles next. The profiles for the last 2 days are very stretched out with multiple distributions. The shape of the profiles suggest that a lot of traders were caught short at the lows. The positive news out of Washington had a lot of momentum traders pile on to the short term rally. Any indication of the talks in D.C. stalling could easily reverse some of the gains we have seen in the last 2 days. For Monday - I will observe whether we open in or out of Balance relative to the upper distribution from Friday. After a large move up I expect the market may Balance. My focus will be on developing Value.The 1691-92 level is key - acceptance below that level targets Friday's lows.
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