Bearish investors are about to experience their Teddy KGB moment, as the trap set over the past two days has been sprung.
What follows should be an absolutely torrid pace of gains not just today, but throughout next week.
Allow me to explain the trap.
Here is the SPX prior to today's open.
Two pieces of bait laid out for investors to either sell or get short.
The first piece of bait was the gap up on Wednesday. Technical traders, of which nearly everyone is on Wall Street nowadays, are prone to the erroneous belief that every gap must be retraced in an expeditious fashion. Throw in the fact that the natural tendency is towards bearishness in this current environment and nearly everyone falls for the good ol' gap retrace play.
Will this gap retrace? In all likelihood, yes. I have a good idea of when it will happen, but we are a ways away from that point in both time and price presently.
The second piece of bait was yesterday's reversal, which served two purposes. The reversal in and of itself made the price structure of the market into Friday seem weak. But what it also did was to magnify the gap from Wednesday, making it an obvious point of interest for bearish investors who are all too eager to pounce.
And with two traps laid in two days we have everything in place that we need for trend day up today.
This means the market should close at or near its highs for the day today and for the week, as investors, once again, remain either underallocated, misallocated or downright ignorant in the face of a rally whose sole mission is to take advantage of the psychological handicaps that have been constructed over the past six months.
Next week is setting up to continue the uptrend in what will be a stunning fashion.
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