One of the market’s favorite tricks is to close right below resistance and blow through it the following morning on the “strength” of the overnight ramp in the futures. SPX came within 0.67 of our next upside target yesterday, suggesting a potential downturn, but will blow right through it on the open. This morning’s ramp job is brought to you by VIX which, despite not making lower lows, has timed its daily collapse perfectly.
The only downside of such maneuvers is that they frequently result in a “pop and drop” – where stocks backfill the newly created gap. It’s a source of irritation to those who bought the open.
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