SPX Wickless Gap Down Analysis/Continuation of Trend
Updated
Chart says it all..
On June 13th SPX opened the week by heading straight down, it tried to rally on Wednesday on the Fed news of a rate hike (LOL) but could never get above Monday's high and then failed miserably the rest of the week to produce a bearish weekly closing candle. And this was a week after an already bearish close the previous week which produced a somewhat rare wickless gap down.
A couple of things to note that confirm the bearish nature of this gap down:
1. It gapped down to open below the .236 Fib re-tracement from the March 2009 low to Jan 2022 high (my bold red horizontal line on this chart)...I understand this isn't a "key" fib but it is one that is used and should be notated.
2. The gap down to weekly close produced a bearish weekly candle smack in between the 150 and 200 EMA.
3. The SPX closed the week with bearish Ichimoku confirmation when the lagging span closed the weekly below the cloud.
4. When viewing this chart during the uptrend you can clearly see these weekly wickless gaps were a CONTINUATION OF TREND. Sometimes the gaps filled and sometimes they didn't (until now...)
5. DJI closed the week below 30K...I was watching DJI on Friday at close minute by minute and they could have accomplished a closing above 30K but the last 4 minutes were a complete bearish breakdown.
6. There were some who felt a .75 vs. .50 rate hike would cause a rally because this would mean "the fed is serious about dealing with inflation" but market has spoke...the .75 rate hike is not going to rally the market otherwise we'd have a weekly hammer candle at closing this week and we would have never had that wickless gap down (someone always knows the news before it's known publicly....)
What I can say with relative certainty based upon reviewing this chart (obviously nothing is 100% certain) is that we will not re-test the 4000 level on SPX. I'm sure a lot of traders have this marked as an area that it should re-test which is exactly why it just won't get back up there. If you look at the chart you can see there was a lot of resistance around the 3930-3940 area during the uptrend before it "broke out" above 4000 (which wasn't re-tested after it broke above until recently)
If you are looking for a good risk adjusted "short/sell" position, it would be a re-test of the 3800-3940 area with a SL above 4000. But maybe Wednesday's re-test at 3837.56 is all we will get...only time will tell.
On June 13th SPX opened the week by heading straight down, it tried to rally on Wednesday on the Fed news of a rate hike (LOL) but could never get above Monday's high and then failed miserably the rest of the week to produce a bearish weekly closing candle. And this was a week after an already bearish close the previous week which produced a somewhat rare wickless gap down.
A couple of things to note that confirm the bearish nature of this gap down:
1. It gapped down to open below the .236 Fib re-tracement from the March 2009 low to Jan 2022 high (my bold red horizontal line on this chart)...I understand this isn't a "key" fib but it is one that is used and should be notated.
2. The gap down to weekly close produced a bearish weekly candle smack in between the 150 and 200 EMA.
3. The SPX closed the week with bearish Ichimoku confirmation when the lagging span closed the weekly below the cloud.
4. When viewing this chart during the uptrend you can clearly see these weekly wickless gaps were a CONTINUATION OF TREND. Sometimes the gaps filled and sometimes they didn't (until now...)
5. DJI closed the week below 30K...I was watching DJI on Friday at close minute by minute and they could have accomplished a closing above 30K but the last 4 minutes were a complete bearish breakdown.
6. There were some who felt a .75 vs. .50 rate hike would cause a rally because this would mean "the fed is serious about dealing with inflation" but market has spoke...the .75 rate hike is not going to rally the market otherwise we'd have a weekly hammer candle at closing this week and we would have never had that wickless gap down (someone always knows the news before it's known publicly....)
What I can say with relative certainty based upon reviewing this chart (obviously nothing is 100% certain) is that we will not re-test the 4000 level on SPX. I'm sure a lot of traders have this marked as an area that it should re-test which is exactly why it just won't get back up there. If you look at the chart you can see there was a lot of resistance around the 3930-3940 area during the uptrend before it "broke out" above 4000 (which wasn't re-tested after it broke above until recently)
If you are looking for a good risk adjusted "short/sell" position, it would be a re-test of the 3800-3940 area with a SL above 4000. But maybe Wednesday's re-test at 3837.56 is all we will get...only time will tell.
Comment
Look...if the Fed news on Wed was bullish for markets then smart money/market makers would not have left a wickless gap last week...wickless gaps are continuation patterns!!! Even if you are a permabull you have to look at the left side of that chart to see just how strong a wickless weekly gap is in terms of trend analysis. Plus, the gap that was left isn't small either...it's 1.61%. A clear indication of just how risky it is to BTFD & HODL.Comment
Gap is officially cleared. A short position was initiated on Friday at close with a SL at 4050. I will continue to add to this position next week. IMO two closings above 4K will mean a re-visit to the 4200 area is possible therefore I will not bag hold should the trade go against me. Again, this is the first wickless gap down...from my study of wickless gaps they are a trend continuation. Currently, the weekly trend is down.
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