Monday, October 13, 2008

Speaking of "gaps"

Some gaps are different from other gaps. Common belief is that most gaps tend to be filled with further longer term trend continuation later on.

I would look at it slightly differently - gaps after weekends/holidays on basically no news in the direction opposite to longer trend after prior business day exhibiting substantially increased volume might signal major trend reversals and such gaps less likely to be "filled".

This morning gap might just be the one we have been waiting for - if I still had cash on my "longer term" accounts (such as IRAs) - I would be back in on the long side. Volumes are not huge yet, but that can be explained by credit /bond markets being closed - lots of traders need to see then "unfreeze" to step back into equities game.
But as you know my final chunk of cash (50%) was put to work n Friday afternoon.
So now I will just sit back and "relax" and wait and let stops to take care of holdings if I am wrong.
DavidDT