A small gap up this morning which took the SP500 hourly chart within 22 cents of that downside gap we have been watching from last week.

Yesterday saw excellent price action along with some short covering on the part of the bears.

I expect that in the next couple of days we could see a test of the 1050 level on the SP500 and perhaps even the 1040, but I believe we have set a bottom before earnings season.

Will remove my hedges if we are going to close above 1040 today which looks likely.

The action yesterday "broke" the head and shoulders pattern that has been the key concentration of the bears. They are still promoting the "death cross" of the 50ma below the 200 day moving average, and this will continue to be their concentration until that is broken to the upside. From my standpoint, the true rally doesn't begin until we cross the 200 day MA which comes in currently at about 1111. That will be the point where any remaining bears will be forced to throw in the towel and capitulate.

Will be out of touch this morning, so do your part and keep things where they are...