Markets poised to gap up tomorrow morning

The markets seem poised to gap up tomorrow morning. Let's look at some of the reasons why.

First of all, INTC has been getting a lot of attention due to the scope of their business, their size, being a DOW component, etc. Intel is of course not the only company reporting, but as with GE, you wouldn't know it. For now, Intel will set the tone until the next whipping boy (GOOG, JPM, MER, LEH, etc.) reports.

Outcome: INTC met their numbers and slightly improved their outlook. In after-hours trading INTC jumped 8.5%. Is that excessive? Absolutely - but keep in mind it's after-hours trading. It may however still have some important implications on other stocks. It may indicate that investors are allowing stocks to trade at a discount due to a certain level of uncertainty (due to earnings season, economy, etc.)... and so when the stock actually does what it's supposed to, it gets rewarded for removing said uncertainty.

From a more technical standpoint: if you click the chart you will see a 'spinning top' (represents indecision) on Monday followed by a 'shaven head' (bullish during a downtrend) today. These are also helping to set the stage for an up day (morning) tomorrow. That said, I currently wouldn't put too much 'stock' into candlesticks. In this choppy market a new pattern can emerge every other day. It's better to focus on support/resistance (s/r), ranges (130-140 for SPY), and s/r indicators such as the 2 day RSI or stochastics. Volume continues to be light and continues to provide little insight.

I will elaborate on this point another day but it is important to remember that some indicators work well with trending strategies, some work well with s/r strategies, some work well with high volatility strategies, and rarely does any one work with all three. More on this later.


So if/when the markets gap up tomorrow, will they fill or continue higher? Good question and obviously if I knew the answer to that I wouldn't be wasting my time typing this right now. Even though there's no way to know for sure, you can arm yourself with some increased knowledge on the subject of gaps:
http://blog.afraidtotrade.com/three-types-of-morning-openings/