I am terribly uncreative with titles on blogs but this may be one of my best (sad as it is).
Expanding on Scott's blog on Tues Jan 30th (highrockcapital.ca/scotts-blog/big-drop-in-stock-market-and-uptick-in-volatility-should-you-be-worried) I thought I would show a chart of the Dow on a daily basis so it is easier to see. Below is the Dow for the past four days (Monday Jan 29th thru to today).
On the far left, Monday represented the all-time high (until we make another all-time high because that is what US stocks do at least on a weekly, if not daily, basis!!) but Tuesday saw a big "gap" down where the Dow fell upwards of ~400 points during the day. And what Scott was referring to in his blog was whether or not the market will be able to "fill in that gap".
It is not uncommon for any market to "retrace" or partially fill in big gaps after big gap down days. So here we are on the second/third day after Tuesday's big gap down day. As you can see above, yesterday the market attempted right at the open to fill in that gap. Didn't quite fill it in but did so partially. And today it has tried again hitting about the same high as Wednesday but again not able (so far) to fill in the gap.
Filling in the gap is important because it demonstrates the strength of the overall market. And if you go back and look at Scott's longer-term chart, you will see that this is the biggest gap down we have had over the past six months. And if you look back even further, you will find this is the biggest gap down we have had since before the Great Recession (it is hard to see on a chart but I did look) other than a small (much smaller than this past week) gap down in May 2017.
So that is why it so important to see, at these high levels and after such enormous strength, if US stocks can "stabilize" at these slightly lower levels, recharge and shoot up higher and fill the gap. Or are they tired and the market has run out of buyers. Time will tell but we will mind the gap each day.