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Article / 14 July 2016 at 12:36 GMT

Gaps serve a warning for US equity bulls

Technical Analyst / FuturesTechs
United Kingdom
  • High openings are an omen of frothiness
  • RSI is emitting a "no problem" signal
  • Nasdaq gaps quickly followed by dips
 Beware of the bull. Pic: iStock

By Clive Lambert

I am very worried. I am worried that things are getting carried away with themselves in Equity markets, and the gaps we're seeing on these charts is the reason for my concerns.

Below is a "special" page of my analysis to clients today talking about the S&P 500 futures and the way we are currently seeing a number of incidents of opens above the previous day's ("day session") high. This sort of thing can spell trouble for the rampant bulls and can act as a warning that things might just be getting a tad "frothy".
S&P Gaps
One caveat to this is the RSI (not shown) which is currently reading a mere 66, which says "no, we're not overbought"...

The NASDAQ 100 (Futures Chart) is also interesting from a "gaps" point of view. Have a look and tell me if i'm wrong?! Look what happened after each of the highlighted gaps; all at high levels; around where we are now!

Source: CQG
Let's keep an eye on how this develops and I'll do my best to update the situation if and when things get (even more!) interesting...

– Edited by Clare MacCarthy
Clive Lambert is chief technical analyst at FuturesTechs


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