These are principles that work in every market: Supply and demand, cause and effect and effort and result.
At one time or another they all show up on the chart.
Yes, but that isn't at all what I meant by "sometimes they work and sometimes they don't", and it doesn't seem to be what you were saying at all in your original post...
Normally, an end to a down trend is a selling climax and a test of that climax. Rapid decent with large volume and wide price spread. Next will be an automatic rally then a retest of the climax low. If it is to have any meaningful uptrend, time will be required to build a base, (trading range).
Looking at a weekly chart of SPY, support was broken on heavy volume, that's a sign of weakness. It is now rallying back to test that break-out because it broke through the support channel of the down trend line creating an over sold condition. But I fear the supports, (now resistance areas), of March and September will be too much.
My interpretation of that is that you have identified a signal that in all cases leads to an "automatic" rally, retest, and trading range. My point was that if you pick a signal (any signal) that indicates a trend continuing or reversing BEFORE it actually happens, I can show you several false signals given by it.
IMHO the real trick is to find one that is right much of the time (doesn't really matter which one it is in particular), then minimize the damage done by false signals and maximize the benefit of correct calls.
M |
