This move wasn't so much of a surprise though--at least not if you follow the charts. Yesterday I mentioned that because of the bullish consolidation in the form of two doji candles after a big up move there was a chance we could move higher. I also said that because of being so extended to the upside, the chances of this happening were diminished.
Defying the odds, the market staged another huge rally to the upside. The SPY ETF gapped up by over a dollar and pushed higher throughout the rest of the day--all the way to 135.70--before closing at 135.36. All of this presumably came on the back of a positive ADP jobs report this morning which the market took in extremely positively.
|SPY gaps up and pushes throughout the day|
Regardless of the cause, the charts pointed to a move higher yesterday and that's exactly what happened. I guess a bull flag is a bull flag even if the extension move higher reduced the probabilities of it playing out. A combination of light volume and a fundamentals-charged environment also helped the S&P along, to be sure.
|A classic bull flag on the SPY|
As of now the markets are back in no-man's-land. The best major support is back down at 1340 while the next resistance isn't until the double top at 1370. I have to assume at this point that the market will at least attempt to hit the double top. With that being said, I'm ruling no scenario out at this point. We are so over-extended right now that a retrace back down is highly likely to occur at any time.
Tomorrow the Nonfarm Payrolls report is released pre-market. The market has obviously priced in a good number so a poor one could send the markets back down, though by how is anyone's guess. If we get a good number, the double top on the market is surely the next target.