SPY Headed for 107.12 Gap FIll

Yesterday, I was very optimistic about a rally but the rally was brief and we began selling off midday. It was probably one of my most puzzling experiences in the stock market. Everything was set up for a rally: good news, oversold, rejection of lows, held major uptrend lines, etc. but the rally just flopped. However the selloff that followed was pretty laborious. More like a slow chop ending with a lower low. So I felt like it was all just a grand shakeout ahead of the GDP number which came out this morning (and beat the forecast) and Bernanke's speech.

SPY is set to gap up and open at ~105.8. This puts SPY above the major uptrend line (A). I expect SPY to hold this support level today and continue upwards to 107.1. Bernanke's speech may spark a rally to 107.1. SPY is oversold, has two touches on a strong uptrend line and is forming a large inverse head and shoulders pattern on a larger timescale. Don't be caught short here!

The most important things to note here is that yesterday SPY broke the minor downtrend (C), so now trendline D may provide resistance. Trendline B is a stronger resistance level and I expect SPY to encounter resistance there for sure.