The big question this week: Will the SPY and the Major Indexes close their gaps, or do they stop here?
On January 4th., the markets gapped down at the open. The gaps have yet to be closed. The SPY closed at 138.90 on Friday, just 3.72% away from closing its 144.07 gap. But, at the same time, the SPY tested its October/May resistance line on May 2nd and May 6th. The SPY was unable to penetrate the resistance both times. The SPY has moved lower since its May 6th test. So the question this week is, which will happen? The closing of the gap, or failing to rise above the October/May resistance line and moving lower?
Watching the level of new lows on the New York Stock Exchange will give you a clue as seen on the chart below. If you see an acceleration of New Lows to the upside and a continuation of trending up, then it will be unlikely that this gap will end up being closed, and the market will move lower. This week could very likely be a wild, high volatility ride in the markets.
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