I believe in trading markets on their own chart merit. I do not believe in creating complex multi-market scenarios whereby one market cannot possibly do one thing unless two other markets and three macro factors do certain things.
It is in that spirit of a love for correlations that I present THE market correlations truly worth watching.
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Markets: $EURUSD $G6E_F G6S_F $USDCHF
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The Nasdaq gapped through the upper boundary of a 4-week triangle early Tuesday. The market attempted a close the gap into the 8:30 AM time period (EST), but new highs have now been registered on expanded volume.
Today’s close and volume will be important to judge the exact nature of the gap. If the market closes firm and volume is quite expanded ( would say more than 325,000 mini Nasdaq contracts), then there is a strong possibility the gap today is a breakaway gap.
Here is what Edwards and Magee say about breakaway gaps:
“Breakaway gaps also develop at times when prices move out of other t ypes of reversal or consolidation formation….There can be little doubt that a genuine breakout has eventuated when prices jump out of a pattern with a conspicuous gap…..they carry the suggestion that buying demand that produced the gap is stronger than would be indicated by a gap-less breakout.
If high volume developed at the far side of the gap, and great many transactions took place there as prices moved on away from the gap, then the chances are remote that any near-term throwback will close the gap.”
Presently the market looks poised to confirm the breakawa gap, but many hours remain in today’s session and much can happen.
Markets: $QQQ $QQQQ $NQ_F
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