The markets opened with big gains today, following a big news event over the weekend. The chart of the Nasdaq-100 shows a pretty big gap. It's somewhat rare for gaps of this size to be left unfilled for more than a few days (or at the most, weeks). Will this time be an exception? Or are traders who're looking to fade this gap going to win out in the end?

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The major indices have recovered quite nicely over the past few weeks, and it looks like the bulls may not be spent yet... Several of the majors are showing bull flags or bull pennants that call for some more upside in the week or two to follow.

S&P-500

S&P-500 Large Caps: Bull Pennant

SPX broke out of a bull pennant last week. The run up into the pattern measured 40 points. Therefore, given that the breakout level was 1125, a target of 1165 is derived from the pattern, if the pennant is legitimate.

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The following piece was featured in Tuesday's Nightly Commentary piece in the Members' Lounge.

Good evening,

The markets traded within a very narrow range near yesterday's closing levels, today. That is to be seen as a big win for the bulls. As long as the indices are above their 20dMAs, the bulls will remain in charge.

One more day of moderately sized gains from current levels would push the indices to new highs on the minor and intermediate trend. If resistance (on SPX and NDX) is broken tomorrow, all levels of trend will be confirmed as bullish, once again. We've seen the indices break out to new highs three times over the preceding three months. On each of those occasions, they ended up turning back down after moving to slightly higher highs. 

This time around, there may be cause to believe that any breakout might lead to a larger leg of upward price action than occurred on each of the previous instances. One of the reasons for this is the fact that the current consolidation has taken place over a period of two to two-and-a-half months and over a larger price range. 

A lot of energy has been built-up within...

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The buy signals we featured on the Nasdaq-100 in the posting "Shorts Beware: Nasdaq et al Showing Positive Divergences on Hourly" earlier this week have proven spot on. The index has rallied nicely since then and, in fact, it is trading perfectly in the middle of the target area that we had suggested.

Nasdaq-100 (NDX) hourly chart showing reaching of target derived from Fibonacci retracement area.

If you haven't already, there's no time like the present to take the opportunity to sign up for a membership package and join us in taking advantage of market moves such as this one.

Pardon me for the lack of blog postings for the past 4 or 5 days. I have gotten involved in a big side project at the last minute and between work on that project and the usual updates to the members area services, spare minutes have been in dearth. To add to matters, I'm in the process of moving house, as well! Anyway, things should be back to normal soon. With that admin note out of the way, let's get down to business.

It has been a good run for the bears. Our trading picks lists are chock full of big winners. But the "easy" part of the decline may be over for now. We're not quite ready to get bullish as yet, but we are on the lookout for a bounce, which we'd use to book profits on shorts and perhaps, once such a bounce has taken place, look to re-enter new shorts, before any next leg down.

This pause comes from a viewing of the daily chart, which shows prices at a flat lower bollinger band, and of the hourly chart, which as you see (below) is showing buy signals.

Nasdaq-100 Hourly Chart Showing Positive Divergence on MACD

NDX has reached support at 1660 as of this morning. So far, support has held up quite well. With RSI at an oversold reading and, more significantly, MACD showing a potential positive divergence, the odds are pretty goo that a bounce will take place. As far as the size of such a bounce, we'd be look at the 38%-62% Fib zone (1705-1732) of the recent down-leg, as our primary target area.

Note that the presumption of a bounce depends completely upon the continued legitimacy of support at 1660. If that level is broken, the downtrend could resume imminently.

With around 40 minutes left until the close of the session, it looks like the Nasdaq-100 might finally be joining the other indices in having broken back below the level of the previous peak that it had put in place (in September).

(Follow the link below for chart and further comments.)

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