New record + Exhaustion gap! How to proceed?

Hello traders and investors! Ok, SPX did another ATH, which is incredible! A few months ago, people thought the world was going to end, but we see a new record high still in 2020. Maybe this doesn’t make sense to some of us, but it does to Technical Analysis.

The market is in a clear bull trend since April, and it seems nothing can stop SPX. Right now, it is doing something interesting: A breakout from the pre-coronavirus ATH with a gap. This makes me wonder if this is a runaway gap, or an exhaustion gap.

The answer will appear soon. If this gap gets filled in the next few days, it means the trend is not that strong to keep it open, and we may see something new on SPX. If you ask me, I don’t see it as a runaway gap, as it is too late in this movement.

On the other hand, SPX is close to the purple trendline and 21 ema, which may support the price if anything goes wrong. There’s nothing telling us the trend will reverse, but we could use pullback here.

If I were on SPX right now, I would just set a trailing stop at the yesterday’s candlestick low and book my profits if it closes under it.

But a pullback would be something normal and expected right now. It doesn’t mean to go short, but to just wait for a pullback to buy SPX again, at a cheaper price.

Now, the hourly chart:


There’s no sign of a pullback here, and every time SPX gets close to the 21 ema is just opportunity to buy, if you like fast trades, of course. But in the short-term, a pullback to the red line (previous top) would be ok and wouldn’t spoil the bull trend.

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The trend is very strong here, and since we are in new territory, we should be cautious here, and manage our positions the best way we can.

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