SPDR S&P 500 (SPY)

[USDollar]

GM, the top resistance line looks well chosen, but that becomes clear only after you form a parallel channel with a bottom line under Oct15 and 21. (as shown in first chart in loanwolf's post 164891 )

There are many ways of drawing a line and according to your way shown in chart (shown bellow), which is pretty straight forward, it's all fine, so you don't need to bother reading further down.

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But then there is my way, and if that is considered then the bellow TA "rumblings" come in play.

Therefore absent the parallel support line, the bottom line here while I wouldn't call it incorrect I call it partial. That's because there have been 3 lines of support (and that even excluding the support line of the parallel channel Oct14-21), your support line here being the 3rd, which makes it incidentally rather correct (but partial since it's only it alone mentioned with no context).

The S line 1 (my way) is between Sep 29 and Oct 2nd. The beginning is fine but the 2nd resting point is through the doji close. You draw that and you get "my" S line 1. This line was violated by the correction that started on Oct 13.

There is a "law of 3" which apply to the strong side which in this case is the upside. There must be 2 consecutive support lines broken, with the 3rd being the final one before reversal.

After the 1st S line was broken we (me) draw S line 2 which we can only after that 1st violation move ends and spy bounces which is on Oct 14. That pivot will allow drawing S line 2 (either using my way or your way, both seem acceptable).

The S line 2 is violated (so 2nd viol now) on Oct 21 which also gives us the pivot to draw the 3rd and final S line 3 (because the bounce occurred the very next day).

So the S line 3, the 3rd line is exactly the line you show, the only line of all 3. A break of it marks the end of this game, and a beginning of a new stage, whatever it may be (but this thing is over).

We can see that S line 3 was violated on Friday Oct 30. Now according to the law of 3, the next bounce should NOT be used to draw a (4th now) line with the same origin of Sep 29, that should be over (we'll see).

According to this rule Friday close (or next day morning which is today morning) should've been the exit long positions used in this trade.
SPY did see a massive 50 mil volume spike in last hour of trading on Friday... a selling hour. Today should be continuation of unwinding and exit with whatever intraday pattern it may be.

So rather now we shall try all this process in reverse, uniting (lower) tops to get an R line 1. We have the starting point which is Friday Oct 30 HOD shown as 209.44, and we will wait for a bounce from LOWER level AND followed by a bounce down with a formed lower top, to give us the next pivot to draw the R line 1.

NOTE: IF SPY tags recent highs, and/or makes a higher high MARGINALLY, then all remains still broken and bearish, only that the starting point of R line 1 would move over to this new sputter effort HOD.

IF the downside is to be considered weaker side, then we don't need 3 R lines rule, and a break/violation of R line 1 will be sufficient to start riding the next wave up (using lines again).

I do use lines, but I do not rely heavily on them unless they have more than 3 points as they tend to be more important (i.e. your S line 3 has 4 contacts prior to violation which makes the violation all the more important).

In other words, there is no way to tell where spy will turn again to upside using this method, therefore the gap at 195 should be only viewed as a possibility and not as a certainty derived from this scheme.

(not that I'd be against it to drop all the way down to 195 or lower)

The laws of R turned S SHOULD* apply (*they violated this law on the way up repeatedly!!!).
But fwiw according to it we shall see bounces of these levels in this order (*be reminded that they recently violated this rule repeatedly) :
206
205 (plus minus)
204 (bellow)
202 (bellow)
200 - 199 (it's a "war" zone)
197 (above)
and the infamous 195 gap fill point

Will all be good clean trades? No one knows. But those are bouncing points formed by October ramp job.

We need to observe the speed of any dump job with the speed of following ramp job and viceversa. It's a great tell if the plane plunges or just reducing altitude, and if rises how powerful it is.

(here's bellow the chart2 posted by Agent13, I commented on, an hourly chart)



Trade well