Doji & the Seven-Gaps

Like the title of a bad alt Disney movie, today's SPY contract gapped up starting way before the tepid Payroll Report. We warned we could see some vicious retracement and used the hourly EMA-34 as a marker, but price far exceeded that level and made a new local higher high which is still in an overlapping wedge shape. Price then waffled around lower, making a double-zigzag lower only before heading up near the open to create the Doji bar. Today's gap up created fully the seventh unfilled gap upward, as the daily SPY chart, below, shows.

While the higher prices overall are great for investors, currently, the numerous gaps on the chart, which is not a first, continues to make wave counting a bit more difficult. For the interim, yes, there is an overlapping wedge shape near the high. We pointed out several of those overlaps in yesterday's post. And today added more overlaps to that list. It can still be part of the (b) wave higher as the price difference overall is minimal.

But our most prescient concern is what happens when the algorithms reverse and go "gap hunting" to the downside? At some point that is still likely. Let's just hope they don't go for all seven at once.

Notice 1) price has pulled away from the upper parallel and has made a turn to the right, which is a slowing of momentum, 2) there is still MACD divergence, 3) and also have a gander at green volume here. We have drawn in just one Fib line. Today was the 1.272 from the initial leg of this mess, and the close was almost dead on it.

There are no certainties here, but the wave count feels very much like B wave territory. I don't think the retrace levels are deep enough to consider diagonals.

So, I did get the call to a (c) wave of a larger B wave incorrect for the day. No doubt about that. And, even still, as frequent readers of this blog know a single-candle pattern - such as a doji is insufficent to call a turn. Much better to have a significant closing lower candle. So, Monday could even trade up again, and reverse, or wait until Tuesday to reverse.

What I just really shake my head at as the chart clearly shows how much risk there is up here, and the complacency is amazing to me. Pick-your-gap fill, right?

Have an excellent start to the evening,

TraderJoe