Rally Time?

Tuesday was a nice tight inside day pattern day on major indices as we coiled up like a spring beneath the 850 level. I think we are headed higher and the chart to the left should convince you of this possible short term rally coming. The last few weeks we have been forming a very quiet cup and handle patttern on the SPX. Cup and handles are bullish and reliable. It should be a good for a continuation of the recent advance.

Yesterday's long ambush that came down to 825 is still in effect and I have a target up to 866 gap fill on this. There was also a great long ambush trade that came down to just about the pivot of 835 on Tuesday. We raced higher after that pullback and are now actually ripping overnight in the futures. The ES is trading 855.50 currently and will probably gap up considerably in the morning.

The game plan for Wednesday is simple. Go long on retracements of big moves. I am bullish but remember the FOMC decision is at 2:15 pm et. The daily pivot point is at 840. I doubt we get down there in the morning because of the strength of the overnight rally. This might be a runaway gap that does not get filled. Anything can happen of course but if we got anywhere close to a gap fill or pivot play then I would be a buyer of it.

On the other hand if we gap up over 860ish then it might just be prudent to hold off and see how the market pulls back. We should see some decent resistance at 866-870 assuming we reach it so we shall see.