The sell-off on Wednesday had no follow through the next day. Instead of falling further, the market dipped slightly lower on Thursday and then rallied back above Wednesday’s low and back up into that day’s range. Friday saw continuation of the rally and a close back up into the upper third of last week’s trading on light holiday volume. The week ended on a positive note.
Last week’s trading remained within the range of the previous week. Should volatility continue to contract this week, we could see the market work its way tighter into an apex, though it is a bit early now to tell if that is occuring. The contraction in volatility already seen can lead to a strong move, so traders should be aware of this.
Friday’s rally indicates a test of the 1289.25 high and perhaps higher if the market can continue to rally and push above the recent resistance at 1275. Thursday’s high of 1245 would serve as support on any pullback.
Intraday charts indicate that the odds favor further rally. I will be watching to see if the market can hold Friday’s high, or push above it after a test of Friday afternoon intraday lows.
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