Gaps and BOW

Many traders believe price gaps between one day's close and the next day's open act as magnets or s/r on retracements. SPX does not have any gaps to fill on the upside as it continues to back-and-fill from the 2126 top. That will likely change in the next few trading days with 1 or 2 gap-n-run moves to the downside if my projections are successful. Below current prices, there are gaps to be filled near 2040, 2020 and 1972. There are at least 3 more gaps between those and the 1820 low. The gaps at SPX 2040 and 2020 are highly likely to be filled in the current downtrend. The 1972 gap is probably also in play short-term.

My projections for a significant mid-May bottom originally pointed to SPX 1820 as a potential target. As time has faded and prices chopped, I raised my preferred mid-May target to 1960-2000 with 2020-2040 possible on the high side. I still think 1820 and prices much closer to the old 1576 high are likely soon but after a bounce (and possibly even a new high) from mid-May. An 80% retracement to the old high has happened every time since year 1900 although quicker in every case than today.

Tuesday and Wednesday were sizable BOW days but not as large as the HUGE BOW day last week after which SPX gapped up and ran to 2121. There was a small SOS day in between as well as one that disappeared at end of day. Typically, BOW days hold up the markets for a few days and vice versa for SOS days. Many times, I have seen the markets go against them 1-2% (20-40pts currently) but prices typically retrace above or near the signal within  2-4 days. Of course, there have been a few exceptions particularly to the upside during the long bull market so it's just 1 tool in the tool belt to help with odds. Perhaps this means SPX will retrace 2121-->2068. Perhaps SPX will fall near 2040 but then retrace back near 2080. Perhaps it means the downtrend is over. Of course, I don't favor the latter but I do believe these large BOW days near 2100 and 2080 are adding to the importance of that price range. SPX price-volume is already heavy at 2100 and 2075 with a big dropoff until 1960-2000 and then again until 1875.

You may notice a lot of the technicals regarding price support are converging...2075-2100 heavy...2030-2040 light...1960-2000 heavy...1825-1875 heavy. Those technicals include gaps, BOW/SOS, price-volume, pivots, MAs, Fibs, trend lines, patterns etc. That certainly doesn't guarantee what the market will do, but it gives us better odds and targets for stops and profit-taking. Combining it with time targets improves those odds especially when technicals, time and targets start to converge as they appear to be doing now into mid-May. Good fortune.