Market Opens Without a Gap

I know it seems like a weird title, but for only the second time since April 3rd, or about a month ago, the SPY (market) is going to open without a gap of .50 cents or more!

It's been a crazy, other-worldly run of gaps that started on March 19 until yesterday. It must be putting traders in shock to look up at the futures and see a flat reading on the pre-market board. And the funny part about it is that we were actually headed for another gap (up) of more than .50 cents until MA came out with earnings about 30m ago. The company missed on revenues and attibuted the miss to everything (bad exchange rates, higher rebates, and incentives) but a drop in consumer spending - which is typical corporate boilerplate when a company wants to keep the stock price from plummeting. The misdirection, hmm - hmmm, I mean their excuse, is not working and the stock is down almost $7, or 4% pre-market. Which, by the way, means that the gap up in the market yesterday, and emotional exuberance, caused traders to overshoot MA all the way to a high of $188.77 less than 24 hours ago. Traders overshoot on earnings all the time, but this was a big trading miss. Imagine the Googly-Eyes that own MA at $188.77 only a day ago, and are staring at an open of 175.50 today, with the possibility of a gigantic Shooting Star that will probably drop the stock further down into the $160's or lower.....ouch.....

The SPY will probably fade off a bit more today with additional profit-taking. It looks like the combination of MA's earnings and the lack of catalysts anywhere else will lead to a little more locking down as traders continue to exhaust the sharp, V-Bottom trend.

Here is a current 15m chart of the SPY:
(click on image to enlarge)

The same intra-day Head and Shoulders is still there, as well as the Ascent Block/Shooting Star type of pattern on the daily charts. The market may go and test the neckline right now - down in the 86.80 - 87.00 area.

7:37 am MT: This is the quietest price action right out of the gate in quite a while. Today will probably be one of two things, either a quiet consolidation day with some small pushes to the upside and downside, or an ooze day where the market just quietly fades off most of the day. Either way, it looks like it will be fairly subdued, at least for much of the morning. Don't look at the index ETF's too much for trading opportunities, but rather focus on individual stocks for something that will move more than the overall market.

7:41 am MT: The SPY made it to the neckline at 87.02. The way the price action is shaping up, I would give it about 55/45 that the market breaks the neckline and fades/oozes down for a little while. The only reason I'm not expecting more momentum to the downside is because of the Googly-Eyes. They will probably nibble at the heels of every dip today. However, despite their exuberance (see MA above), the market looks like it will fade a bit.

7:51 am MT: I just checked MA and it made it all the way to 163.64 a few minutes ago.....double ouch.....

8:00 am MT: Here are some movers and shakers this morning (remember to check spreads and earnings dates):

Bullish: RIMM, SOHU, MFE, ROK, and BTU

Bearish: AOC, MA, MET, CELG, APOL (there's one for you Gary), DV, NSC, NEM, CVX, STJ, VMC, and COV

8:07 am MT: The market wiggled back and is rolling over again. There is a variation of a Descending Triangle forming on the 5m charts right now, which is also the right shoulder of the Head and Shoulders on the 15m - 30m charts. This is the kind of quiet consolidation with pops and drops and drops and pops I was expecting.

The Descending Triangle lends itself to the 55/45 odds I have for a break of the neckline. A drop below 86.80 would confirm the break of the neckline and lead to more oozing to the downside. A break above 87.50 - 87.60 and the market is probably going to try and push another .50 cents or so and then perhaps travels sideways. This still looks like a quiet ooze or quiet consolidation day, so I'm more interested in the individual stocks and patterns today than the index ETF's.

12:48 pm MT: It was door number two. The SPY held the 86.80 area (the low was 86.72, but it was only there for two minutes), and then pushed through the 87.50 - 87.60 area, which caused another run of about .50 cents (it was actually .61 cents from the confirmation at 87.60 to the high at 88.21). Now the little mini-push during the late morning and mid day looks like it's done on the overall market.

As soon as the market pushed through 86.60, that was the time to look at the bullish stock list I posted earlier. Three of the five stocks (RIMM, SOHU, and BTU) all had nice, playable runs after the market turn. Two of the five (MFE, ROK) rolled sideways for the most part. So there were three winners and two breakevens from the list this morning.

When the SPY hit the .50 cent target beyond 86.60 that I mentioned earlier, that was the time to be scaling out. As it turned out, the market went another .11 cents, so the target was just about right on. Anything beyond the target (that last .11 cents) was a chance to scale out of most of the rest of any calls from the bullish list.

Some of the bearish list stocks still worked today as well, despite the market consolidating and making a mini-push. MET, CELG, APOL, DV, and NEM are down some more from earlier in the day.

1:00 pm MT: There is a Bull Flag forming on the SPY 15m charts, but I'm not a huge believer in this one. It will probably pop to the upside a little, but I don't see the market rallying hard into the close. If the Flag pops to the upside, use the move back towards the highs of the day to take profits on any remaining calls.

1:03 pm MT: There goes the Flag, it popped to the upside. If the SPY gets back to (or above) 88, then lock down the remaining profits. It may try to run to 88.25 or so, but I think there is a 50/50 chance this pop even turns out to be a failed signal. Normally Flags are about a 70/30 to make a higher high, but this one, in its context, is probably more like 50/50.

1:17 pm MT: I was correct, the Flag bounce was just as likely to be a failed signal, which it did.

Here is a current 5m chart of the SPY showing the failed signal:
(click on image to enlarge)

I had to show the failed signal on the 5m chart so you could see it better, although the Bull Flag was actually happening on the 15m chart. Today will probably end up as something like a Doji, or modest consolidation, which is right in line with what I was looking for this morning - a quietish, consolidating, or oozing type of day. The stock watchlist was much more useful to your trading today than the index ETF's, just as speculated.

Important Notice: I will be repeating this again over the weekend. Starting Monday, this blog will not be the first place I post market sensitive information. I will be starting a formal beta test of the new service tomorrow and run it for a few days to make sure everything is clean. Then the new service will launch after the test. I will cut and paste some text-based information from time to time throughout the day (from the new site) and post it here, so this blog will still be useful. But much of my focus, starting on Monday, will be posting the live, market sensitive information, as well as stock watchlists and paper trades over on the new site. I will give updates over the next several days regarding the changeover, and I will work on keeping this blog at least functional for all the regular viewers as I make the final preparations for the complete transition.

1:50 pm MT: The market is close to finishing out as a Doji. So a quiet day overall, with a few movers and shakers that I pointed out earlier today with the stock watchlist. Many traders are probably already gone for the weekend.