Check out some recent trends and observations on the S&P500 index, to the right. I'm starting to think that - The index develops trends in the form of rallies and corrections, and follows that trend until it hits strong resistance or support.
- Identifying and trading with the trend is key.
- A trend can be confirmed when it breaks through a horizontal line.
Side Notes:
- If I had made this chart a few weeks ago, I would have sold off my shorts around 670, the bottom of the channel. I may have reloaded them around 704, but then seeing a break from the trend, I would have gotten stopped out. Then, once the new rally broke through resistance at 736, I would have confirmed the rally and started getting long.
- Perhaps anyone long going into monday /23 had some decent sized cojones, but perhaps they also were drawing trend lines, and saw a bigger channel overall.
Verdict:
Stay long for Monday. We've yet to break out of this channel on the downside, and the loss on friday wasn't on any kind of significant volume (see second pic).
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