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ISLAND REVERSAL?
The bulls are still showing strength as they nearly erased a 155 point drop in the DOW. The DOW still finished down 41 points, but again the story was how the day played out. The DOW and S&P 500 are still fighting the inevitable retracement and there is a key possible reversal pattern that has showed up over the last few days. It is called an "island reversal". An "island reversal" is created w
hen the stock gaps up (or down) near the top (or bottom) of a bullish (or bearish) trend. The prices then stay near that gapped price for a day or two (although sometimes it can be just one day). Then the price will gap down (or up) and start going in that new direction. The gapped prices look like an island...separated from the rest of the price movements. The DIA and SPY both show a gap up that occurred on April 2nd. This gap has been followed by two days of prices in the same area (see charts - DIA - top, SPY - bottom). If we gap back down tomorrow, the markets could have a high probability of selling off (although this pattern would be much stronger if we had not pulled back on March 30th). This could create a short term bearish trade. You would want to wait until the last hour of the market to make sure that 
the market was going to close down. If we gap up or continue to move higher, we could still continue this incredible bullish move. One area to keep an eye on is the resistance area on the SPY. We are sitting right at it. Any significant move higher could really propel the market higher. Again, you would want to watch the close of the market tomorrow. If we have broken above this resistance, you could look for a short term bullish trade. This possible movement of the market could affect any current positions you might be in. One other thing to look at...look at the price action of the financial stocks today. Almost every financial stock's price movement today was within the price range (intraday high and low) of Friday's movement. A price break out of Friday's range (either way), combined with the market analysis above, could present a short term bullish or bearish trading opportunity on the financial stocks. AAPL continues to fly...up $12 since I first mentioned it. AMZN and NFLX have also done well. This is not a good entry point for new positions on these stocks...wait for the next pullback. Also, keep watching FSLR.
hen the stock gaps up (or down) near the top (or bottom) of a bullish (or bearish) trend. The prices then stay near that gapped price for a day or two (although sometimes it can be just one day). Then the price will gap down (or up) and start going in that new direction. The gapped prices look like an island...separated from the rest of the price movements. The DIA and SPY both show a gap up that occurred on April 2nd. This gap has been followed by two days of prices in the same area (see charts - DIA - top, SPY - bottom). If we gap back down tomorrow, the markets could have a high probability of selling off (although this pattern would be much stronger if we had not pulled back on March 30th). This could create a short term bearish trade. You would want to wait until the last hour of the market to make sure that 
the market was going to close down. If we gap up or continue to move higher, we could still continue this incredible bullish move. One area to keep an eye on is the resistance area on the SPY. We are sitting right at it. Any significant move higher could really propel the market higher. Again, you would want to watch the close of the market tomorrow. If we have broken above this resistance, you could look for a short term bullish trade. This possible movement of the market could affect any current positions you might be in. One other thing to look at...look at the price action of the financial stocks today. Almost every financial stock's price movement today was within the price range (intraday high and low) of Friday's movement. A price break out of Friday's range (either way), combined with the market analysis above, could present a short term bullish or bearish trading opportunity on the financial stocks. AAPL continues to fly...up $12 since I first mentioned it. AMZN and NFLX have also done well. This is not a good entry point for new positions on these stocks...wait for the next pullback. Also, keep watching FSLR.
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