Great Graphic: Potentially Bullish S&P Chart

The recent price action in the S&P 500 is  constructive.  The case for new highs we suggested seems intact with the recovery from the early losses.  

This Great Graphic, from Bloomberg, shows the price action over the past month.  Recall that last Thursday the S&P 500 extended its pullback to 5% and reversed higher.  After the jobs data the next day, the S&P 500 gapped higher (GAP A) and closed above the recent downtrend.  

The S&P 500 stayed above that trend line yesterday, but gapped lower  (GAP B) today.  Technically if that gap was not filled it would have left a bearish 2-day island top in its wake.  However, the gap was filled a couple of hours into the session.  The close will be important.  A close above its opening level of 1638.64 would be particularly constructive, with a potential candlestick hammer formation.  

While the early losses saw last Friday's gap entered, it was not closed.  A small gap still exists between 1622.56 and 1622.92.  This too is a favorable technical development and lends more credence to our suggestion that it was a technically a break away gap, which is also consistent with the S&P 500 on its way to new highs.