Inflation Slowing – Don’t Chase This Gap Up

May 15, 2024
Author: Peter Stolcers, Founder of OneOption

The S&P 500 traded to a new all-time high after the CPI was released. Be careful.

PRE-OPEN MARKET COMMENTS WEDNESDAY - We expected a big market rally in November and we rode that move hard through March. The market momentum waned and we took gains on long swing trades. The rally from November through March featured stacked green candles on heavy volume and there were not any dips. A trend with this strength was not going to die easily. On April 4th we had a massive gap reversal off of the all-time high. The volume was extremely heavy and this was a warning sign. This was a time to shift to day trading. Buyers and sellers were paired off and we were going to see some volatility. If we got a market dip, we needed to gauge the depth and duration of the move. If we were going to short intraday, we had to take day trades. It was way too risky to short against such a powerful up trend overnight. We got gaps up that reversed and the market pulled back to the 100-day MA. We knew that there would be a bounce, we just had to wait for support. If the dip was brief and shallow, the bounce would be strong.

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