The above daily chart shows closed gaps in blue and two open gaps on the right in green.
A gap occurs when the market opens above the previous day's high or below the previous day's low and stays there for the rest of the day.
I have commented on gaps several times before and they tend to act like magnets.
On June 10th the S&P 500 gapped down below its lowest point on June 9th. It did so again on June 13.
On June 23, someone on Twitter asked me about the strength of the market. Neither of the gaps had yet closed.
Q: Is there any reason why all indices went up today?
A: Impossible to say, but most likely just a small continuation of the relief rally. There are two open gaps above and it would not be shocking if they filled.
The idea of a top in long-term US treasury yields will be the subject of another post.
On June 24, Friday, we saw a big continuation rally with the S&P 500 up 113 points (2.99%), and the Nasdaq up 375 points (3.34%).
The rally Friday closed one of the stacked gaps but left another gap in its wake.
I am very confident the new gap closes.
Order of Closing
It would be more bearish for the June 10th gap to close first, the idea being unfinished business to the down side.
If the gap up on June 24 closes first there is still easy room for another rally to close the June 10th gap.
None of this really matters in the long run, but for traders looking to get short, that stacked gap lower was a big warning to take some chips off the table,
It's unclear what rates the above Tweet is referring to.
At the long end, the top may very well be in for now. At the short end, at least one more 50 basis point hike is coming.
I have no opinion on whether or not a currency swap contributed to Friday's move, but VIX manipulation is silly. The Fed is not doing a currency swap to influence the VIX.
S&P 500 Monthly Chart
The S&P 500 bounced right on the monthly support line. So if you are looking for another reason for the bounce, technical support is arguably the best one.
There's more support at 3200, 2800, 2400, 2200, and 2000. I'm inclined to think the stock market has a date with 2400 and more likely 2000.
Much depends on the path the Fed takes. But if we get there, don't think stocks will be cheap and it's off to the races again.
Most People Have No Idea How Much Stocks are Likely to Crash
Flashback February 23, 2022: Most People Have No Idea How Much Stocks are Likely to Crash
2400 is where I drew a line on a chart. Jeremy Grantham mentioned 2500.
The S&P 500 was about 4300 at the time, down from 4800. It's now 3911 after a big rally. Lot's more downside is likely.
Monthly Trendline Addendum
One of my readers asked about Grantham's trendline hitting 2500. Technically, it's not a good line. I see it like this.
The thick blue line is my preferred trendline and the thin is an alternate. The only way I can get Grantham's proposed trendline is the thin red line.
I believe the 3200 line is correct but that support will break.
Also, 3200 is monthly support. There are two reasons to like that area for another bounce.
I try to draw trendlines that hit the most points and are closest to other points. My 3200 line does that and encompasses support areas a well.
This post originated at MishTalk.Com
I said I doubted the Fed was watching the VIX but they did mention it in the latest minutes.
But watching is one thing and doing is another. In the previous cycle, the Fed suppressed the VIX via QE and lowering interest rates.
We are in a period of QT that just started and the Fed has penciled in more rate hikes.
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