Trading The GAP In U.S. Indices

It has been an eventful Monday for the U.S. indices. The S&P 500 and DJIA have opened gap up and are currently trading in the green. Last Friday’s eventful news cycle is the culprit, with the plea deal involving ex Trump-aide Flynn and Senatorial approval of the Trump tax plan being the catalyst.

Traders have been active, bidding the S&P 500 and DJIA north of the gap. However, the tendency of open markets is to fill in any areas neglected by participation. We may see the indices challenge the gap area for the remainder of the U.S. session.

S&P 500 Technicals

Mondays are always interesting. News events that occur over the weekend have the potential to drive price action directionally, even when the markets are closed.

E-mini S&P 500 Futures (ES), Daily Chart

As of this writing, price in December E-mini S&P 500 futures is undergoing correction, attempting to fill in the opening gap of 2654.50 to 2642.75. This area is likely to serve as downside support for the immediate future.

In this area, heavy participation will be the norm as buyers and sellers attempt to identify fair value.

Overview

Trading the gap successfully can be a challenge. Often, price action becomes chaotic creating whipsaw market conditions. Patience is always a virtue in trading, so today’s session may be a good time to observe the action and plan for tomorrow and Wednesday.

There are many upcoming opportunities this week, so trade smart and keep risk in check!

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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