Index gapped past resistance at 850 and did not look back. It held steady into FED time, spiked on extraordinary volume, courtesy of the FED show, burnt a whole lot of shorts, and eased back a little into the close.
Volume was strong. But examining a 5-minute chart of spy shows us that about ½ of the daily volume happened after the FED-speak in a churning manner. Just have a look
Breadth was positive on all measures.
It was a day of hope and euphoria.
Seemed like nobody wanted to be short, so, I decided to lose some money and switched from long to short. It's a small position, the risk is well defined and acceptable to me, we'll see. Those high spike volumes are just too inviting. Sometimes they work, sometimes they don't.This rally needs a follow through.
The advance today eliminated one short term wave scenario, but there still are more than one probable count
Had the internal wave structure of the advance from the January low been cleaner, I would readily count it as a 1-2-3 up, but things are not that clean. That being said, due to the force of the advance today, I expect higher readings on the index. 850 area should provide support now, and a break of that area will not be very good. It would be very healthy if the index pulled back a bit, recharged, and advanced again.Up to now, bears had a clear level to try their tricks. Now, bulls have a clear level to reload.
Looking at the daily chart above, notice that the index is far from being overbought, and if media hits us with a barrage of positive news, index can easily work itself into overbought areas.
I will watch the 850 area, I will be waiting for a pullback, and should pay attention to how the index behaves around and/or inside the gap of today when and if it pulls back.
Next resistance: 912
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