The only real chart that counts

• Posted by admin
• on June 10th, 2011

 

This is the big kahuna — ideally we’d like a slight overshoot of the very watched 200SMA into the loving hands of the trend-line from March 2009.   Nothing goes straight down but that trend-line test seems like a given.  In our experience the first test of the trend-line is often a great risk-reward long.  The second test, not so much.   What do we mean?

Tests are fine when there is a long passing of time between each test — the last time we tested the trend-line was late August 2010.   Tests however become more bearish when they repeatedly bang on the same area in a short time span.   The first test of the trend-line, hopefully next week, we would buy for a bounce.  But we would not be involved in a banging of the trend-line week after week and not going anywhere even if price stays the same.  This what we mean by “buy the first test, but never the second”.

Click to enlarge

If the trend-line doesn’t hold next support comes near SPY 122 — but we’ll cross that bridge once/if we get to it.

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