Watch For Early Reversals After A Gap Up – Buy Dips On Support

Posted 9:45 AM ET - The market is in a pattern characterized by overnight gaps higher. We've seen choppy intraday action the last two days and that suggests that the momentum is slowing. Earnings season is cranking up and the results have been fantastic so far. Guidance is off the charts. This is the beginning of a very bullish year. Corporate tax cuts are fueling this move and companies are expanding operations. Intel will post results after the close today and it will set the tone for tech stocks. Economic data has been strong domestically and internationally. Flash PMI's were released yesterday and they were good. The FOMC will meet next Wednesday and analysts are expecting three rate hikes this year. The Fed could take a more hawkish stance given the recent market rally. Powell has taken the reins and the transition has gone smoothly. Fed officials want to get interest rates back to a normal level as soon as possible and they have breathing room to hike. "Rocket man" has stopped missile testing ahead of the Olympics. Politicians extended the budget for two weeks and Schumer is taking heat from Democrats. Both parties seem to be making progress on immigration reform. Even after a big run up, the market is ignoring the mudslinging and it is discounting the likelihood of a government shutdown. The current price action is as strong as you will see. We should expect a few pullbacks along the way. They will be brief and shallow. Swing traders should ride their call positions. The majority of the move has come on overnight gaps. Raise your stops and use SPY $282 as your guide on a closing basis. Day traders need to buy dips. Use extreme caution when buying overnight gaps higher. We've seen a number of them reverse intraday. I mentioned this in my comments yesterday and there was an excellent shorting opportunity. We should start seeing more intraday volatility and there was also an opportunity to buy the dip as well yesterday. I have been relatively quiet during the first hour of trading. Once I get a sense for the direction and the momentum I can start take action. This rally still has more gas in the tank. Mega cap tech stocks have not posted and that will keep a bid to the market. . .

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