The moment of truth

We will soon see whether the recent bounce after the Bernanke induced sell off is merely a dead cat bounce or the beginning of another bull leg:

(click on chart for larger image)

 

This is a sixty minute chart of the S&P500 SPDRs ETF which is the heavily traded version of the S&P 500.  This snapshot taken at 9:59AM EST.  I've outlined the gap between the 19th and 20th of June in the aftermath of the Bernanke speech which spooked the market (http://equitymaven.blogspot.com/2013/06/bernanke-pops-bubble.html

 

 

Gaps are significant support/resistance areas that need to be filled in order for the prevailing trend to continue.  In this case, the gap is acting as resistance. 

 

If SPY is turned away here it will probably mean a resumption to the downside.  If it can clear the gap we should easily run up to the 165 area (or higher).

 

 

My guess?  In the short term with the recent good news on unemployment and personal consumption we should clear this gap.  I'll be addressing the longer term in my commentary this weekend.