Why Monday Gaps Are Peculiar
Well, another day where a large chunk of the day’s move appears to have
occurred in the overnight session. This does not typically leave much for us
anxious daytraders. As you know, I refer to these days as
Gap and Crap or Gap and Grind. Let’s
hope that there is better price action than what I am envisioning. Naturally,
the war in Iraq is being touted as the cause for rally, and with Baghdad looking
to be within our control soon, there is little to argue…or is there?
Monday “gaps” are peculiar beasts. Typically, the gaps are fueled by actual
news with a healthy dose of euphoria/panic thrown in. Now that the war draws
near the close, how much of that euphoria will hang around after the opening? I
am reasonably sure that there will be the usual fade-the-gap trade on the
opening (assuming the gains remain), but will we be looking at lower levels by
the close?
I hate to turn to fundamentals (Who knows what is right anyway?), but let’s
be realistic. IF and that is a big one, the war concludes this week, at least in
terms of the big job, what has the market got to look at next? You guessed it,
the economy and earnings. Neither appears robust. Sure, the market discounts
going forward, but…? My gut feel is that the market could hit an air pocket
here. This is important for two reasons:
- HVT will become more prevalent and
frequent and certainly more robust - There may be some great short opportunities for those of you looking to
manage longer-term trades.
We all know that when the market turns at the very time that everyone is just
getting excited about piling in one direction, the action that ensues can be
great for traders.Â
The VIX turned up slightly on Friday, but closed at the lower end as the
market recovered some of the early losses. However, it does appear that the VIX
is in the process to trying to seek out higher ground. That combined with the
fact that we cannot take out the .618 level from Dec. 2 (893) is rather
puzzling. This article was written on Sunday evening. As of Monday morning,
the S&P futures were above 893. Naturally, a close above 893 would be a better
sign.
If in fact that 893 level is taken out, the market may very well feed on
itself to the upside. If that is the case, some good intraday swing trades may
be found in eBay and
Lennar.
Unfortunately, as of Sunday evening, I came across no convincing intraday
short setups like those mentioned above.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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* Indicates a level that is more significant
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