Pushing the Limit

We’re approaching the cash open over 15 handles above yesterday’s close thus today’s gap is of the professional variety.  Therefore, attempts to fade the gap intraday will be much more difficult than your typical gap.  This also gives us a puzzle piece: if the gap were to fill that would be very unusual and could signal a peak in the recent move higher.

I’m not saying that’s what’s going to happen, let’s be clear about that.

The large gap does mean today brings higher opportunity as the market is out of balance and must now work the buyers and sellers to re-establish appropriate levels of auction.

Today I’ve zoomed out to see where the S&P 500 is trading via the rolling e-mini future contract.  As was suggested, we’re testing the very upper bounds of a potential range. With the exuberant reaction to Fed Chairman Benjamin’s commentary yesterday evening we’ve wasted no time with 1650 which was of huge significance during May and June.  Instead we’re pinned up against the next major level 1667, which features many of the May peaks and marks the upper quadrant of the 05/22 peak event.

The highs are now just an earshot away at 1680.25 and the question becomes, did we get a level of padding as we enter a patchy earning season?  Are we destined to be range bound this summer?  Or will new highs be made, and met with a flood of initiating buying?

It’s a challenging environment, but in terms of intraday trades: when the overall trend is higher, you give your longs more room to run and allow support a fair chance to work.

It should be a challenge for mean revision to set in today.  Again, I advise you pay close attention to the earnings out of WFC and JPM Friday morning, and then C, MS, and YHOO on Monday.  They should provide direction at this interesting junction.