Week ahead- Watching that 956 Pivot

When we look back a month or so from now, it is quite possible that we will be talking about what took place on July 15th. It was on that day when we saw a breakaway gap over the old 912 gap that seemed impossible to get back over while the bulls were fighting to simply hold the 875 neckline. We had been testing that nasty 875 level over and over. We held when suddenly, and out of nowhere, we gapped hard over 912 and just kept on running for the rest of that day. Volume was quite strong and the advance decline line was quite powerful as well. Two necessary ingredients to confirm such a gap up and run. If that gap had been accomplished on lighter volume or by just a few leading, heavy weighted stocks, it would make the whole move just another meaningless head fake. The bulls celebrated in that they did get what was needed in the volume and the advance decline line thus it was something that had to respected. The gap also provides good news to the bulls in that it puts another very powerful support level at 912, protecting 875 down the road. When you get a gap as powerful as what we saw Wednesday above the critical neckline at 875, it makes the task of breaking down by the bears much more difficult. Lots of money will come in and support this market at 912 now. It's an extra layer of clothing for the bulls that has to make them feel more secure. What's even more telling is how the market, on the short term time frame charts, has stayed grossly overbought since that gap up on Wednesday. The bulls feeling braver and braver while the shorts are willing to cover more quickly than usual. They understand the power of this gap and know their task is harder here thus the desire to not stay around too long and watch their money erode away. That's how overbought stays overbought. We will need some selling soon to unwind things some but that selling should be more shallow than what we could have expected without that breakaway gap in place. It's a game of emotion and the emotional component here is the greed of the bulls versus the fear of the bears and fear is a much deeper emotion to deal with. People respond to fear a lot faster than greed.

The measured move break above the pivot is measure to the 998 level.



MARKETJEDI