Just time for a quick post tonight. After gapping up about 0.5% on Thursday the market failed to make much headway. Around 3pm the gap was closed. A late rally left the market slightly positive on the day. This action is fairly typical of how the market reacts to mid-sized gaps in downtrends. It’s the big gaps that frequently lead to short-covering rallies and strong moves. With volatility picking back up and the fear seeming to climb we may be seeing more in the way of gaps in the next few days and weeks. You may want to review some of the gap studies to see how the market has performed in the past following certain gap situations.

The CBI didn’t move today. The way things are set up it could go either way tomorrow. A strong up day may reduce it and a strong down day could get it to “10”. Keep a special eye on the financial sector.

For those wondering, the McClellan Oscillator finished around -175. I will make a note of it when it closes above zero, which would signal an exit to last night’s “system”.