The TARP Gap Looms

Yesterday, I said to be ready for a pullback when SPY approaches the lower boundary of its TARP Gap. And that’s exactly what happened. Tuesday afternoon’s sell-off began (blue arrow on chart) when SPY came within nine cents of the lower boundary, which I have at 119.34 (click chart to enlarge):

There wasn’t much in the way of bearish catalysts at that time. CNBC was talking about the Citigroup FINRA fine, but I doubt that would have put a dent in this monster bull market on its own.

While the gap appears as vacant space on the chart, in actual reality, it is comprised of bulls who have been trapped up there with horrific losses for 19 months. When they sell in relief to finally get out even, which is a very popular way to “invest”, they create the resistance. How many are there? How much buying power will it take to clear them out? I don’t know, but I would make two predictions: the gap will be filled at some point during this bull market, and it will require a struggle lasting from several days to several weeks.

78 Responses to “The TARP Gap Looms”

  1. George says:

    The TARP gap will be conqured. Why? Well, the reply is the same as in the Marine Corps when told to take a hill; “because it’s there”.

  2. after says:

    Futures Prices
    Market Last Change %
    Crude Oil 86.36 -0.48 -0.55
    Natural Gas 4.109 +0.013 +0.32
    Corn 346.50 +0.75 +0.22
    Soybeans 944.5 +8.5 +0.90
    30yr Bond 114.71875 +0.31250 +0.27
    10yr Note 115.218750 +0.218750 +0.19
    NY Gold 1136.0 0.0 0.00
    NY Silver 17.985 +0.054 +0.30
    Emini S&P 1182.50 -3.25 -0.27
    Emini Nasdaq 1974.75 -4.00 -0.20
    Emini Dow 10894 -19 -0.17

  3. stringm says:

    Hank

    Don’t know how long I will hang with my TWM. This will be a TMAR adventure I am sure.

    String

  4. George says:

    Matt,

    I think you have identified MARS – the TARP gap.

  5. George says:

    After,

    Thanks, one small pullback for wo(man); one leap up for wo(man)kind. Except this time, it’s not the moon, it’s Mars. :)

  6. phil says:

    GEORGE……bought back SCHX in pre market @ 28.07

  7. George says:

    Here’s an updated MOO/DOO with Matt’s MARS implanted. FYI, there’s a lot of DOO down below. Patience is warranted.

    http://i44.tinypic.com/2qxtklv.jpg

  8. 2thfixr says:

    I completely understand the thesis Matt, but honestly, do you think there are that many bull investors (not buy and hold investors, but traders) that bought and held this gap area without buying more dips for profits that weren’t shaken out a long, long time ago that have an intention to sell once back to even? That would be some mighty deep pockets, a stomach of cast iron, and a long trip to get to even. Just sayin’. I’m sure you are right, I’m just not 100% on board with this thesis.

  9. George says:

    Phil,

    You can trade that in after-hours trading?

  10. phil says:

    GEORGE……..DOLLAR soaring but stocks dont really care….remember everyone was looking for stocks to crash with strong dollar…..i warned that was erroneous thinking long ago

  11. phil says:

    george i just did

  12. Mitch says:

    “Not always there when you call but always on time”

    >>>>very popular way to “invest”, they create the resistance

  13. George says:

    Phil,

    Agree about the dollar coorelation. Also true to some extent with treasuries.

  14. George says:

    And precious metals.

  15. phil says:

    GEORGE……..especially gold….it is rallying with dollar..THAT is very significant if it continues…if so i will step up gold purchases

  16. 'K says:

    Us is still the safest place to put the money lol.
    Until we tell the world to take a hike.

  17. phil says:

    SOLD gold…..its outside daily bb…….will rebuy on pullback

  18. Hank says:

    Ha, when I saw Phil go long I tightened my stops.
    Not long after (pun intended) I was stopped out for a nice profit on the SDS and SPY PUTS.
    Phil, I locked in profits at the open so your post did not change my plan, just improved it! :mrgreen:

  19. stringm says:

    Hank

    I had to take my pennies and run in the premarket.

    String

  20. phil says:

    2TH…bought TBT on dip yesterday@ 50.11…..target is 51.20

  21. George says:

    Lots of consolidation going on the intraday time frames. Change a comin’?

  22. George says:

    SPY resting on 15min 36MA support. Looks negative on that time frame but the 5min is trying to bounce its MACD. I’ll go with the 1 and 5min.

  23. Hank says:

    String, as George says a profit is a profit. In Phoenix premarket is pretty early ;) Also it’s not an option for PUTS — sorry for the groaners I couldn’t resist :)

    George, I agree the market is clear as mud. I’ll wait for a better entrance.

  24. George says:

    Hank,

    Nothing better than consolidation to clear up the water:

    http://i39.tinypic.com/10okxuo.jpg

  25. phil says:

    HANK….profits are profits…good work!

  26. George says:

    Retailers are trying to fertilize those green shoots. That’s working better than the Round Up. But when the hot sun hits those shoots… watch out! :)

  27. Hank says:

    George,
    I want to play the next multi day downdraft. They seem to be getting stronger. I will wait for it to start rather than fight the tape anymore.

    Phil,
    Thanks. Suspecting that I was wrong again about the start if the next downdraft I took my cookie and went home.

    Anyone notice AAPL is up 25% in two months?

  28. phil says:

    HANK….dont focus too much on the down drafts…they are buy opportunities…..i think SPX 2450 is viable once we blast above 1550

  29. George says:

    AAPL has been amazing. Now a $1 move is only .40%. It’s starting to sell off a little now.

  30. hank says:

    Phil,
    I agree the trend is up. This could be like the mid 1990′s who knows when it stops.
    However, I suspect the next big moves are down then up.

  31. phil says:

    HANK…you could be right….however i still have not ruled out a huge up gap yet…i would not want to be short if that occured…you could be trapped short for years

  32. Hank says:

    Phil,
    I’m in cash now. Interesting concept of being trapped. I see that in many places but never understood it. If I’m wrong the stop takes me out – even on the ugly side of a gap. NEVER let a mistake become an ‘investment’.

    Almost all of my serious money has been in cash since early 2008.
    In my industry (Semi’s) things are rocketing up with no end in sight.
    I plan to put some 401k money back in SPY if we do correct.
    Do you still have your wife in cash?

  33. phil says:

    HANK…she still has 15% long spx fund

  34. George says:

    SPY has yesterday’s intraday gap to fill. That could be a turning point for a move higher. At least that’s what I would be looking for.

  35. phil says:

    GEORGE…..MAX pain is 117 spy….more realistic than last month eh????

  36. Hank says:

    Phil,
    15% long does not seem very bullish. Fear > Greeed?
    This from a man at 0% looking to get 10% long. ;)

  37. George says:

    Phil,

    Will MAX pain work this time? It didn’t seem to do too well the last time. Else I missed something.

  38. George says:

    One thing’s for sure, this sure ain’t a MOAR – yet. Orderly pull-back.

  39. admin says:

    10-year note auction results at 1pm. $30 billion worth, I think. Let’s see if it wakes up the market.

  40. George says:

    I get those auctions on my iPhone from CNBC. It will be interesting.

  41. George says:

    VIX is inside its BB today on the daily.

  42. George says:

    U.S. Auctions $21bln 10-year notes, high yield 3.90%. (Source: CNBC-RT)

  43. Mitch says:

    CNBC needs to tighten up – that’s a 33 minute delay.

  44. Mitch says:

    Certainly NOT “Real Time.”

  45. phil says:

    SELLING some 10 yr notes on any further rally

  46. phil says:

    SOLD SCHX for tiny profit..i think B wave rally is over for today..C down coming…will rebuy if we get smash down

  47. George says:

    So, you want the “real”, real-time? That will cost you $29.95 per month, Grasshopper. :D

  48. phil says:

    LOOKS like C wave down now..i want to buy a break of todays low

  49. phil says:

    bought partial position here

  50. stringm says:

    George

    Look at PXP!

    String

  51. George says:

    Stringm,

    Hope you’re in PXP! WOW

  52. Joan says:

    FWIW,
    If this is for real, could have a lot further to go.
    SMH, BKX, AAPL & GS still positive, once they go…
    “Just sayin’”
    CNN is showing a live shot of a high rise fire 6 blocks away,
    can smell the smoke.

  53. George says:

    Phil,

    I agree as long as SPY can stay above the daily 9MA.

  54. stringm says:

    NO – I was just checking out a tool at TD called motion detector. Needless to say I will be watching it more closely. PXP is moving to fast for me.

    String

  55. George says:

    K,

    Close to getting one of your triple triplets -111.

  56. George says:

    Mini-MOAR on a Wednesday? Sup with that?

  57. George says:

    TNX closed -1.05. Back down to 38.63.

  58. George says:

    The short-covering coming soon will tell a lot about what this is.

  59. George says:

    Joan,

    Good observation. Especially if BKX goes negative. Fire not good.

  60. Joan says:

    Two down, two to go.

  61. George says:

    SPY gap filled just now. Here we go.

  62. George says:

    Consolidation play on SRS working good. Couple of places for entry:

    http://i41.tinypic.com/35a0l5i.jpg

  63. Joan says:

    K,
    Are you anywhere near Beacon & Mass Ave?

  64. George says:

    Eh, K, not even twin triplets. No natzi soup for Mr. Market today.

  65. K says:

    Joan,
    I was downtown today giving a big presentation of my fund to some big shots.
    I finished talking ~1:30 and look what happened to market.

    They loved it and so did the market cause it crashed.!

    hehehe!

  66. K says:

    Nice SRS analysis george!!

  67. Joan says:

    I think that we have seen the highs for the week.
    K, you will see it on the news, but there was a massive high rise fire on Beacon at Mass Ave, it is out now. Bravo, BFD!!

  68. K says:

    Oh I was walking in the common when my friend got a text from his friend about it. WOW I didn’t make much of it. I take it you live near Beacon and Mass ave?

    BFD is awesome!!

  69. Joan says:

    Comm Ave & Clarendon, close enough to smell the smoke!

  70. K says:

    just saw it. Amazing rescue indeed

  71. George says:

    I’ll have to catch it on youtube

  72. stringm says:

    Matt

    I figured you might have a comment about this post on ZH.

    http://www.zerohedge.com/article/now-about-alleged-increase-tax-withholdings-government

    I got called by the census bureau yesterday and I am suppose to show up for training on 4/27. Work is suppose to last for 6-7 weeks. Just so you will have a frame of reference for us door knockers.

    String

  73. 2thfixr says:

    Phil, looking to reload TBT below $47 at this point.

    Sitting in lots and lots of cash in trading accounts. 70% invested in 401k.

    Greecefire anyone? GLTA trading. Phil sounds like he is on fire right now.

  74. admin says:

    String,

    The BLS does their surveys for the jobs report in the middle of the month, so it doesn’t look like your new job will be counted in the April report.

    If I have time, I will write a rebuttal to the Zero Hedge post. But if you look at weeks 9-12 on their first chart, you will see that there was indeed an increase in the raw data for March. And they didn’t even mention the withholding tax credit that is still in effect and has reduced withholdings by a large amount for the past year. So, March was stronger still.

    And the concept of “net withholdings” is just dumb. We are not studying the finances of the federal government. We are trying to figure out how many paychecks were cut.

    Thanks for the heads up,
    Matt

  75. George says:

    Thanks K for the link. 9 Alarm… serious fire.

  76. Hank says:

    Today was a great day to ‘short heavily at yesterday’s close with a stop above yesterday’s high’. I think Julie liked to something like that. Just saying…