Most technical oriented speculators are looking for possible levels the market may run into for resistance. I say resistance versus saying looking for support areas because it seems the market keeps marking its support level as it goes higher. We are well aware of the nearest downside gap (1270 area), as well as other downside gaps the market has left in its wake. Those gaps will be filled at some point. repeat: those gaps will be filled. But for now, the market is streaking across the sky with “pick a number” in sight. Who the heck knows how high this market can go – we sure don’t, but throwing up a Fibonacci number on a weekly chart, it projects a possible target level of 1343 (see chart below). What?
The market has been in an accumulation mode since Spring 2010. The bears managed to bust up the accumulation pattern and it appeared the market would begin to test somewhere in the 900 area, but it found a support area at the 1004 level (ironically a Fib level). The market has not looked back since.
Wednesday’s (Jan12) price action gapped the market above the recent consolidation range; if the market opens gap down and moves below the former resistance level @ 1274 it will more than likely close the gap at 1270. This will of course create an island top pattern. The island top is not a favorable condition for being long. Tomorrow’s session may give some hint to the answers we as speculators are in search of….