Since the US market drives the global markets, I was amazed to see that there weren't much of a discussion devoted to the Dow, S&P 500 and Nasdaq charts.

I have long been curious regarding gaps. I have heard that the gaps are always filled or something to that extent. Why is this so ? I mean what is the reason for this.

And I noted a gap on the SPY ETF from Oct 3rd (Fri) close of 110.34 to Oct 6th (Mon) open of 107.15. This gap is yet to be filled ! Does this mean that the S&P 500 will fill this gap in this current BEAR MARKET RALLY ? Will the rally have enough strength to take S&P 500 to 1100 levels.

Obviously this gap will be filled one day, but what if it takes 10 years to do so - in my opinion, that wouldn't count as filling a gap. Perhaps one would call it a new bull market or whatever.

PS. SPY ETF is priced at 1/10th of S&P 500. I believe DIA ETF (for Dow Jones) is also 1/10th of Dow.

I know no logical reason why a gap should get filled. (Many people say that gaps get filled, but I have seen too many unfilled gaps and hence don't believe any such theory).

Some gaps get filled and some never get filled.

If all gaps would get filled, why would there be gaps in the first place?

Suppose stock makes a low of 44 on one day.

Next day the stock opens at 41.

If all gaps are going to be filled, why would anyone sell at 41 and if the stock is certainly going to touch 44 in next few days, everyone should be buying the stock at 41...isn't it?

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Gaps can act as a crucial support/resistance level.

Gaps leave one side of the market in a shock.

In the above example, bulls would have been left in a shock when the stock opened at 41.

The usual thinking of such a shocked side is

"if the price comes back to the previous day's low/close, I will liquidate my position".

This means if the stock were to go up to 44 in next few days, the longs (bulls) would prefer to close their positions.

Thus, this level (44) would now become a strong resistance as many longs (bulls) would like to close their positions at this level.

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There is a thread on Dow Jones Industrial Average in the World Markets forum.

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I wasn't aware that gaps may end up never getting filled. So maybe S&P 500 at 1100 is being way too optimistic.

I was just saying in general, that one should not take a position on assumption that gaps always gets filled.

Anyway, 1100 does look over-optimistic to me. I am bearish on the US markets in the long-term.

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The S&P 500 is on the verge of a break out if it were to close above 919 levels. Currently the S&P 500 is trading at 925 levels. The one caveat though is that this break out is occurring on very LOW volumes.

If this were to be a TRUE breakout for the S&P, the next S&P 500 target will be 1005 levels. The positive global cue(s) should help the Nifty overcome the 3150/3250 resistance levels and head upwards to the 3500-3800 range.

Honestly, I would wait until Monday/Tuesday to see what the big boys are up to. The US market has run up 6% in the last 3 trading session and there is a greater chance of profit booking when the big boys come back.

Both the S&P 500 and Dow Jones Industrial Average have crossed their respective 50 day EMA yesterday.

This has happened after nearly 7 months.

It looks like a valid breakout to me.

If the indices can sustain current levels for next 2-3 sessions, both indices may move up by around 10% in next few weeks.

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Alchemist,

Technically, which amongst these is most important ?

(a) Price action (In this case S&P 500 closing above its prior resistance of 919) - Definitely a Positive
(b) Volume (In this case S&P volume of 4,048,270,000 is lower than Dec 31 as well its average volumes) - Slightly Negative . Is this a Bull Trap ?
(c) Trend (In this case S&P 500 has been making higher lows since Dec 4. Now we also have a higher high!) - Definitely a Positive

(a) and (c) indicate that we may have good days ahead, while (b) warns
me to remain status quo until a clear trend emerges (after the big boys place their bets)

Alchemist,

Those blue dotted lines are your Fibonacci retracements from the 1576 high to 741 low right ?

Roughly,

S&P 1060 (for a 38.2% retracement)
S&P 1158.5 (for a 50% retracement)
S&P 1257.0 (for a 61.8% retracement)

Closely looking at your chart, I am quite convinced that's what it is. Your number's is a tad bit higher than mine.

For me, price is always primary and volume is secondary

Volume should be used only as a confirming indicator.

If volume supports the price breakout, the price move is strong.

If volume doesn't support the price breakout, it means the price move is weak, but I wouldn't conclude that it's a false breakout.

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This may or may not be an upward breakout for the S&P 500, but I don't really expect the long-term trend to change for the US markets.

I am sure even if the S&P 500 manages to move up in next few days/weeks, it's going to face tremendous resistance (selling pressure) near the 200 day EMA.

By the end of next week we will know whether this is a genuine breakout or a trap....

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