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Market Recap: My Gap Rule Ruled The Day

August 25, 2008 6:47 PM

My gap rules once again ruled the day. It also outlines why I strongly dislike trends. I mentioned early on that the trendline was in the mid 1270’s. It tried to hold 1275 area and once that cleared down she went. In retrospect it should have been an easy 8-10 point day to the short side and then just “leave it alone”. Once we cleared 1282.75, which was the gap low from Friday, my theory suggests that the gap should fill. Therefore, we should have gone to at least 1277 area before “possibly” reversing. That is another reason I thought 1275 or so would hold. 1260.50 (1261 cash) did hold as I said in an intraday post was a MUST hold today or there likely would have been a massive panic down.

Tomorrow is a different story. 1260.50 is still critical, but is not an absolute must hold. It depends when it clears and the market reaction if and when it clears. If we open higher, I would be skeptical and today’s high should be a lid. If it clears todays high, then Friday’s high woul be the next test. If we open lower and take out 1260.50 early, the market may reverse in the 1257 area - or it may not.

Keep in mind that I have said repeatedly that I do NOT believe we have seen the low on the SP regardless of what everyone has been saying on TV. They are wrong, IMO.

Written by Tom@StockBlade.com · Filed Under Pre-Open 

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