The market has made it extremely difficult for bears as they have witnessed yet again another resounding bear trap. Although the market is overextended very short-term, there is no reason whatsoever to be short at this point. The market opened higher on a significant gap up above resistance. As always when that happens, the first thing that should come to mind is the potential for a trend day which we got today. By definition, a trend day finishes at or near the high of the day which makes it THE easiest setup to trade. I still see bears impulsively jumping in front of the train in hope that this rally will miraculously stop for all kind of reason: “Volume is light”, “there is no fundamental basis for this rally”, “it’s been 7 months, when will this stop?!”, “I’m gonna add to my short position” etc… Only price pays. All they are doing is fueling this rally higher by covering time and time again.
Levels to watch the next couple days will the high above SPY 110, and today’s low SPY 108. There is always a chance for a double top so keep a close watch on that level. Most likely, we will continue higher up to the 50% retracement of the entire crash at SPY 113 which is only a stone throw away now.
Economic Data:
Tuesday: IBD/TIPP Economic Optimism (50.3)
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