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Mind The Gap
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Mind The Gap

by The MoleApril 25, 2017

Sorry lads (and ladies), we’re not going to talk about thigh gaps today although it may easily double traffic numbers here. Instead we’re up for another lesson in tape reading but I think it’ll be very worth your while. So, courtesy of our croissant dipping friends in France we all were bestowed with a fairly large opening gap across U.S. equities on Monday morning. Now opening gaps, especially in equities, often have a nasty habit of filling shortly thereafter, which then offers participants a tasty inflection point for getting positioned.

2017-04-25_spoos_update

However if the gap remains unfilled then we should take note as it will strongly affect probabilities going forward. Of course there are no clear rules chiseled in stone about any of this and a gap-fill can easily materialize several days or even a week later. Remember though that price does not move in a vacuum and participants do respond to technical context which then becomes a self fulfilling prophesy. If for example the tape gaps but then manages to progress beyond widely recognized support or resistance clusters then a reversal fill may either be postponed for much later or may never materialize at all. As in home decoration or marriage proposals – context is everything.

More specific to the current situation I see two significant inflection points:

  1. The recent spike high (or NLBL) at ES 2387.75
  2. The prior all time high at ES 2398.

A breach and close above 1) would tremendously raise the probabilities of 2) and of course if we wind up painting new all time highs then once again the sky is the limit. On the bearish side it’s clear that we need to remain below the NLBL with the exception perhaps of a quick stab above which quickly gets sold. It would be preferable to see the Zero indicator paint a divergence and then continuing to point lower.

Bottom Line:

If you are still long then there’s really nothing for you to do right now as the meat of the move may still be in front of you. It may be a good idea to put your trailing stop a few ticks below yesterday’s lows as this is not territory we ought be seeing again anytime this week. A breach > the NLBL at 2387.75 is the golden ticket for a final push higher.

A breach of yesterday’s lows will most likely draw us into a gap fill and from there we would have to sort things once we have assessed momentum and buying interest.

2017-04-25_EURUSD

Now if we apply these perspectives to the EUR/USD then it’s clear that I probably should be heading to the ATM over the remainder of this week as much higher prices are most likely looming ahead. We did get a bit of a response after that first spike up but since then I’m seeing renewed buying interest in both the EUR and especially the YEN. In terms of technical context we have basically nothing but air above on the daily while the weekly shows us two NLBLs near 1.082 and 1.09 and the well observed 100-week SMA just below 1.10. It pains me to say so but it’s quite possible that we’ll be touching that one sometime before the 2nd round election in France. Should Macron actually take the helm then a breach higher may easily be possible.

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • OJuice

    After grinding though the past couple weeks, it sure is nice to sit back and let a position run. On a side note, P&F has $SPX target of 2489 right now.

  • Mark Shinnick

    Sounds like you are enjoying bear meat for the time being :)

  • OJuice

    Hah. Bull/Bear don’t matter to me. I just want to be on the winning side.

  • Mark Shinnick

    Bot miners, very tight. At a rough GDX support zone for the time being. The miners 3x’s appear to have distorted the underlying miners; a important issue. See WSJ article, no link sorry. Important to note that the 3x animals cannot be traded except as to their own individual character = no reference to any underlying is reliable.

  • Mark Shinnick

    OK, I’ve begun some tza buys with tight stops. Will likely be joined in the trade at least somewhat.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Mark Shinnick

    Standing aside on this for now, see no momo.

  • Mark Shinnick

    Way to go man. No delay to eject.
    https://youtu.be/Aa1Ba_NEobs

  • BobbyLow

    But this is why Ms. Market made DUST. :)

  • http://evilspeculator.com Sir Mole III

    Where did everyone go? Maybe I should take a few days off… :-[

  • OJuice

    Zero stuck I believe.

  • yudhisthira

    Is zero stuck?

  • Mark Shinnick

    The majority has been alienated by energy confusion, equity rally, and gold failure (at significant resistance). Markets working with perfect normalcy.

  • BTrader

    yes it is stuck.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Phillip Reeder

    anyone thinking short up here?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://evilspeculator.com Sir Mole III

    Turns out that the entire system went down. This is actually the 2nd time in a week and I just filed a not very friendly support request with the hosting company. I am trying to get on the bottom of why this is happening. Very possibly a hacking attempt but I’m also going to install some security tools to find out if there has been a system compromise that’s responsible for the crashes.

  • http://evilspeculator.com Sir Mole III

    Sorry – I was in an online seminar and didn’t realize it was down. Please email me right away next time.

  • Mark Shinnick

    Its still a marching army that hasn’t quite reached its ST objective.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    *Hedger*
    =P

  • Mark Shinnick

    Remember too that the slower bears from last week and yesterday are still thinking without yet acting on their margin calls.

  • Trouzzer_Snake

    @molecool:disqus /HG would have been a great trade if your entry price hit. Was not cooperating though. Up, up, and away.

  • Trouzzer_Snake

    My Intraday breadth indicators are showing plenty of room left to run, wouldn’t short this with someone else’s money.

  • Phillip Reeder

    ok, cool thanks

  • http://evilspeculator.com Sir Mole III

    Well, exqueeze me!

  • BTrader

    is there a divergence on the zero here Mole?

  • http://evilspeculator.com Sir Mole III

    Yes there is but the session is almost over and there isn’t much time for it to resolve.

  • BTrader

    thought so!

  • http://evilspeculator.com Sir Mole III
  • Mark Shinnick

    Margin call Gentlemen.

  • HD

    Well, when I’m wrong it’s just as spectacular. My analysis did not pick up the DJI LL and SPX no LL 4/19. In hindsight my indicator was aligned for the DJI not the SPX. There is room for improvement. Mostly sidelined this week with no advantage and zero intraday volatility. A retracement would help. My ‘indicator’ doesn’t do well on cloudwalk rallys, just embeds. Doubt the Zero does either but I’m still hanging around to see how it looks and if it will meet my needs.

  • Phillip Reeder

    nice divergence there

  • http://greenlander1.blogspot.com/ Greenlander

    You short?

  • http://evilspeculator.com Sir Mole III

    Good eye BTrader!

  • http://evilspeculator.com Sir Mole III

    Most indicators do that actually which is why they are pretty useless during massive rallies or sell offs. Which in turn are excellent profit opportunities assuming one is able to ride them out.

  • http://greenlander1.blogspot.com/ Greenlander

    Why???

  • Mark Shinnick

    None of my equities rules permit that for the time being.

  • Trouzzer_Snake

    Not complaining! Great call, I was watching closely and it just ran away from me. I was tempted to buy anyway but stuck to my entry rules.

  • http://evilspeculator.com Sir Mole III

    Rules are rules.

  • OJuice

    I’m not gonna lie, I went to the slopeofhope.com for a non-scientific bear sentiment check.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Scott Phillips

    Last week the market looked a good chance to break lows and fall hard. It didn’t.

    There is a price to be paid for that. The bears are due for a good kicking, and it’s not over yet.

    Best stay away from top picking for a while

  • Mark Shinnick

    Could be, they were really lining up super bigtime at the trough last week.

  • Mark Shinnick

    What’s the name of that build-your-own model backtesting/trading software mentioned some weeks ago?

  • Mulv

    quantopian

  • Mark Shinnick

    Thanks.