The Gap Dilemma: How Soon Will They Fill?
Unpacking the Likelihood of Closure for Key Market Gaps
Two weeks ago, on May 17th, in the Weekly Compass I anticipated a visit to the 40 weekly average as follows:
A pullback at the current levels is normal considering the recent rally and a potential reset of technical indicators on the daily, using the central level to manage risk for longs is good since a visit to the 40 weekly average is possible and it could be painful for long positions recently opened. If that happens, remember that the 40 weekly average was retested in June 2020 as part of the V shaped recovery from the COVID crash, and also in March 2019 as part of a V shaped recovery from the Tariff war 1.0. Those revisits to the 40MA brought -4.8% and -2.2% pullbacks respectively for the SPX; and they happened after a MACD bullish cross.
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I'm mentioning that because the technical pattern repeated exactly as expected, even the decline after a bullish MACD signal. The only particularity this time was a gap below the moving average, which created a distraction by suggesting a potential gap fill before the bounce.
When there's an unexpected move, I don't fight the chart; I study more. So, I analyzed the S&P chart over the last 20 years to learn more about gaps and avoid any similar distractions in the future, the results are below for the SPX.
Let's kick off this market update with Tesla and Nvidia, two of the most popular securities. Afterward, we'll continue with SPY, a detailed gaps analysis for SPX, VIX, BITCOIN, GLD; and the latest prices for PLTR, NFLX, AAPL, MSFT, SLV, along with all other securities featured in the Weekly Compass (access here), complete with their updated combined levels.
NVDA - Earnings and Revenue Beat as Data Center Sales Jump 73%
At the moment of writing this analysis, the price action after hours jumped +5%, finding resistance at $140.9, which is the second weekly resistance zone calculated last Friday for this week. That level matches the higher edge of the volume shelf highlighted by the red arrow. The price is set to open with a significant gap, and considering the latest bearish reversal candle, there are good odds for at least a partial fill for that gap. Nevertheless, the context remains bullish considering the recent breakout of the bearish downtrend, and the price is consolidating the current volume shelf, which should act as a launchpad after a period of consolidation. $132.6 remains as the key level to watch this week considering the confluence of the central weekly level and a monthly resistance that flipped to support on Monday.
The bullish crossover between 20 and 50 DMA is welcome by bulls in the chart, anyway there is still distance between the 50 and 200 DMA, a golden cross may take time.
TSLA - Consolidating the Volume Shelf
Today, the price found rejection at $365.5, the immediate bullish target presented last Saturday for this security. If we are strict with candlestick patterns, the latest candle is a fake dark cloud, meaning that the bullish momentum continues and a breach of the central weekly level, $341.9, is very unlikely.
The current volume shelf, which was highlighted in the weekly compass when it was smaller several days ago, now suggests a solid consolidation area. Once the price jumps above its higher edge, a rapid move towards $390 is likely.
The annual $353 level, also presented in the weekly compass, is being breached as of today, adding bullish references to the landscape.
Unlock the complete analysis with Support and Resistance Levels for SPX, NDX, DJI, ES=F, NQ=F, SPY, QQQ, IWM, DIA, SMH, TLT, NVDA, TSLA, MSFT, META, AAPL, GOOG, AMZN, PLTR, NFLX, GLD, and SLV. All along with the charts for SPY, SPX Gaps Report, VIX, GLD, and Bitcoin.
SPY - Rejection at the Bullish Target $591.2 + Bearish MACD Crossover