Numerous gap ups have been recorded this year in major US stock market indexes. In fact, from the October 3rd to November 27th stock market rally there have been a dramatic increase in frequencies of daily gap ups and only a couple of daily gap downs during the same time frame. Gap ups occur when the market or security in question opens higher than the previous trading day’s high. This is typically a bullish technical development indicating more buyers than sellers during the day in question. Conversely, gap downs occur when the price opens lower than the previous trading day’s low. This is interpreted as bearish condition.
So, are the daily gap downs across key US stock market indexes on 12/3/19 a warning of a major top in the US stock market? Or are these gap downs subtle technical indications to suggest these markets need to alleviate near-term overbought conditions before resumin
g their primary uptrends?
It is our contention the recent 2-year broadening top/bottom and/or head/shoulders bottoms, ascending triangles, and 1-year uptrend channels breakouts are significant technical developments. Collectively, they represent bullish technical conditions suggesting the sustainability of the primary bull uptrends as the breakout targets have yet to be achieved. This would then imply any near-term consolidations would represent another buying opportunities as the primary uptrends resume.
Attached below we have identified key technical support levels. When a technical support zone converges along the same area it takes on more significance. That is, when a major technical breakout is in the same general area as a key moving average (50-day ma) and a key Fibonacci Retracement (38.2%) this is important support. Currently major US stock indexes including S&P 500 Index (SPX), Dow Jones Industrial Average (INDU), and NASDAQ 100 Index (NDX) will be converging toward these key support zones.
In the days or weeks ahead, we suspect the bulls will begin to defend these levels by buying into the consolidations setting the stage for the resumption of the primary uptrends.