Markets are set to open lower but the gap fade trade may be in play. The trade is to buy the gap and use a stop equal to the size of the gap. According to John Carter, Friday's have a tendency to fill the gap 78% of the time over the 4.5 years that was tested for his excellent book Mastering The Trade.

Back to the chart at hand, I asked several folks yesterday if they thought this was the beginning of a new downtrend or just a blip in the uptrend. The answer was the same from everyone, no idea.

Those momentum indicators, especially the Rate of Change indicator is telling that the uptrend is running out of momentum. One of the first books I ever read on trading was by Gerald Appel, where he described market buyers with lots of power in the beginning of a run and then fading as the buying power dries up. Like a golf ball being hit off a tee and being brought back to earth after it runs out of power.

Anyhow, that seems to be what is happening now as all those momentum indicators are flashing bearish divergences. Also check the action on the Smelly Sox, generally a leading sector of market direction.

And speaking of golf balls, check out the Ryder Cup today (TNT), one of the best events in sports as there is always passion, excitement and camaraderie.


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