The market is moving into an area where it is going to start getting afraid of its own shadow. It’s getting too close to the sun. But fear not a big drop is unlikely especially if we hold the gap that we opened this morning. If we do establish a gap today, this has long-term bullish implications as this will be a mid-point or mid-rally gap which means that this rally will be going a lot further and will last a lot longer. If the gap does hold, we are looking at a move from here as big as the 1810 to 2060 move which is roughly 250 points. That points to about 2300 on the SPX. I know it sounds crazy, but this gap is either an exhaustion gap or a mid-point gap and I don’t think it is an exhaustion gap. Although seeing PCR go below 1.0 today could point to exhaustion, in no shape or form should you get ahead of this bull train and start shorting. The market needs a multi-day and multi-week consolidation phase before it rolls over and we are nowhere near that right now.

In the short term, the 2080 area of the SPX is where the last major Lower High was so I expect the SPX to hesitate in that area before it pushes forward. Today it got up to 2072, but that’s not close enough yet to challenge that resistance. But we should challenge 2080 soon. Probably on Friday. I expect the next couple of days to continue to be subdued as people wait for the jobs report.

Very bizarre to see the VX1 trade up a 1% to 16.25 since the VIX hasn’t been above 16 since March 15 and is currently anchored in the 13.50-13.70 range. I have no idea what these people are thinking. Expiration is in 14 days. Everything else is negative. Not only that, on Friday we have the April jobs report which is the best month for not-seasonally adjusted (NSA) jobs at 883K average and the 4th best for seasonally adjusted (SA) jobs at 123K average. The number that is widely reported is the seasonally adjusted number. In any case, the best month for SA jobs is May with 140K average and that is also the 2nd best NSA month at 847K. So I have no idea who is buying the VIX in front of that train of news, but those people apparently do exist. Be my guest and go long volatility when on average 1.5 million people enter the workforce over the next 2 months. Good Luck!