Is this gap up real or it is a head fake? This is how we will know and how we will trade.
PRE-OPEN MARKET COMMENTS THURSDAY – The market is trying to work off some of the supply at the 2023 high. Traders who caught the year-end move at the beginning of November are happy to lock in some gains. That selling pressure has been met by longer-term Asset Managers who are adding to equities. The strength of the rally during the last two months of the year tells us that buyers are in control. This process is referred to as “digesting gains”. A compression forms because buyers and sellers are in agreement. Eventually, long-term buyers exhaust the supply and they have to get more aggressive. They raise bids and the market breaks out. Traders who took profits reload on the breakout. Shorts that thought this was a “double top” have to cover at a loss. This buying fuels the next leg higher.
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