The Bulls Take Over

May 5, 2006 · Print This Article

A gap occured today and the bulls pushed the opening gap higher throughout the day. Fading opportunities were squashed today as there was no opportunity to take even a small profit. We haven’t seen a gap like this in SPY since May 18, 2005. The lower than anticipated unemployment numbers were the reason for the bullish move and the bulls are hoping today’s report is a signal that the Fed is “one and done”. The move higher pushed DIA into “very overbought” territory and SPY into “overbought” territory. An indication that the chances of a short-term decline are highly probable. I am not as fond of the “overbought” measure as much as I am of the “oversold” measure. Although when an index reaches “very overbought” such as DIA the chances of a short-term move lower are that much greater.

RSI Wilder (5) for May 5, 2006