The Obvious Thing that didn't Work

The Obvious and the Subtle 

• Obviously Wrong
• Signals on Principle
• No Need for Whole Numbers

Obviously Wrong

Anyone with a background in technical analysis can point out that his trend line here should have been a resistance point for anyone speculating on the inference that the wash-out that occurred in late January would continue for the rest of the year with a few pauses along the way.  From one point of view, the most obvious take on trendline analysis has proven to be wrong .

Signals on Principle

The upside break of the trendline here acted as a bullish buy signal and it proved the potential to add another 2.9% to the SPY.  Each downside break along the path to 256.  Being a good trader involves obeying and respecting signals, and in this instance it was a bullish one and powerful enough to carve out some decent profits even if its a bullish view.

The Need for a Whole Number

Many traders and analysts need whole numbers like 275, or 280 to claim an important number (in this scenario a resistance point) And in this next image we'll examine the point of inflection and why 274.05-275 was important as both an origin of a rally and correction.  

 1.  274 maters because it was a point of a gap.  Price then rallied extremely fast lead us up to all time highs.  The hidden nature of 274 is probably embedded in the memory of many programs that are set to either buy heavy or sell heavy at this level.

2.  It is clear that this point on the chart expanded the range and momentum to the downside and eventually bottomed at 254.14

3.  There were two touches of this line, both acting as (memory) of the decline that happened in reference #2, resulting in tall candle wicks and marking more distributive pressure.

4.  The first bullish attempt to reclaim a rally but we'll see how it doesn't last until it gaps

5.  An equally powerful red candle to signal and engulfing candlestick formation (make note 4 and 5 had very long real bodies) the action between 3 and 5 was more sideways and should have been traded like a range of 2 to 5 points

6.  The SPY was only able to reclaim 2.41% similar to point 4 where it only gained 1.71% it also proved the point in how likely gaps are to fill

7.  Plunge with Heavy Supply - this was one of the last tests of the buyer's strength, time will tell whether this marks the most significant area of supply (heavy distribution) and the reason why I noted point 8 as stall.  This level was an important point of inflection for either a rally origin, correction origin and a mid-range energizer.  Today's candlestick also can take a bearish interpretation of being the consolidation before the downside break or reversal.

As always there are so many millions of people in the crowd involved in these markets and opinions are subject to having flaws.  I have been following the bear case for a long time and I could have skewed the point here, but this would make an awesome top here if that proves to be true.  

Technically speaking, this could spark a bearish reversal, but confirmation is needed for it to have more staying power.  

Trade well...