Wednesday, April 25, 2007

SP500 analysis

Analysis of the S&P 500 spyders (SPY) chart...

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There have been unfilled 3 gap ups for the month of April. Each successive unfilled gap up increases the possibility of the most recent gap up being filled.
The gap up from last friday has a good chance of being filled. That implies a test of the 147.25 level is in the cards. Whether the test of 147.25 fails or succeeds is anyone's guess.
Trend is up, but a close below 147 would signal a pullback - but not necessarily a break in the uptrend, since the 20d EMA is at 145.5.

I try to remain objective and neutral. However, it is worth noting that SPY shows 3 white candlesticks on the weekly chart. And the technicals on the weekly chart indicate overbought conditions.

Each successive unfilled gap up does NOT increase the possibility of the most recent gap up being filled. This is just a theory of mine, and I have no hard data to back this up. Thanks to Richard for pointing this out.
The first two gaps in April are breakaway gaps, because they gapped above resistance. Those two are unlikely to be filled. However, the most recent gap up from this past friday was NOT a breakaway gap. That's what led me to think that this gap up will be filled.

1 comment:

Richard said...

why do succssive unfilled gaps increase the probability of the next one being filled? I don't see the connection. Is there some reference or data for this? I guess, in particular, I'm wondering why it matters that there are gaps involved. Any stock moving strongly in a direction for too long will eventually take a breather. Is it statistically more likely if there are gaps involved?