Friday, we had a very strong follow-through on the Dow, which formed what will probably end up being a Measured Gap. I say “probably” because with large gaps at the end of moves, there is the possibility of Exhaustion.
The potential for this will be indicated by a move back into the gap, “filling it”. At that point, if it happens, the market could be signaling a reversal. We would want it to turn back up at which point it will become a Measured Gap, which forecasts the same target as the broad consolidation of 29,500.
DJIA – 39 Minutes
If you look at the Daily Chart, you can see several patterns that predict more upside. There are two consolidations – a near term one that says we are going to 28,000 and a larger one we have marked before that suggests an upside move to 29,500. So there is a lot of bullish sentiment and a lot of reason to stay long.
DJIA – Daily
From all the evidence, the prudent course of action is to stay long, watch the Gap to see if it fills, and if it does, watch the support levels drawn in the 39 Minute Chart.
We know there has been good news from Europe. Very few articles now on the coronavirus. So, we have every evidence that the market is pushing back to highs. With strong demand from the rest of the world, and Fed stimulus, the market should continue pushing higher. We are likely to see a profit-taking correction this week. After that, it will depend on news entering the market. At some point, economics cannot be ignored.