The Bounce Continues

The S&P 500 finished up 2.72% last week. The S&P 500 moved up with little interruption throughout the week and finished Friday with a bang. We had the highest close we’ve ever had on the S&P 500, but we are just shy of the all time price action highs. Below is a daily chart of the S&P 500.

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In the chart above, notice the gap in prices within the green dot and the orange dot. There are three types of gaps…break away, continuation, and exhaustion. The break away gaps happen at the beginning of a trend, the continuation in the middle, and the exhaustion at the end. The gap caused by Friday’s price action is hard to see on this chart, but much more apparent on the sector and industry charts.

If this is an exhaustion gap, it could be a signal for the end of the shorter-term trend up. If this is the case, we will see the trend reverse in the shorter-term charts first. Of course, that has not happened yet. This last correction in the market didn’t destroy the structural integrity of the markets, but it certainly tarnished it.

In summary, all the time frames I watch within the S&P 500 are trending up. If we do start to see a reversal on the shorter-term scale, we will start measuring for possible turning points to the upside as the long-term trends are still up.

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