Three Gaps Down in a Row - July 12, 2011

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With the IWM pre-market pointing to a sharply lower open around WS2 (82.44), the likelihood is high that the robot will reenter a new long position well below the limit buy price of 83.06, and in the top range of the very strong first cluster support.

Masterthegap.com indicates this morning that after two successive unfilled down gaps, 100% of the third successive down gaps in their SPX database have filled. It means that an intraday reversal is very likely up to yesterday’s close. This adds some juice to an excellent reward-risk entry, characterized by weak resistance and strong support. However, the LT/ST robot statistics are very weak for this new trade but still in favor of the long side. Multi-pivots analysis suggests that it could be true up to weekly pivot (84.88) where stronger floor resistance starts to mount.
The initial stop for the new entry will be just below WS3 (81.34) or the worst-case expected low for the week, breaking down all the important support confluences.

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For GDX, although the LT/ST statistics remain desperately weak, a new buy entry today at 55.54 looks very good from a multi-pivots reward-risk standpoint.
For the very first time since the initial long entry on June 23rd, the first support cluster is stronger than the first resistance cluster. The confluence of the 50-day moving average (55.33) and yearly pivot (55.19) is a most powerful support and launching pad on the way to test the 200-day moving average (57.76). The old refrain that SPP and QPP (56.61) need to give up first is always valid.
Billy

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