Watch for the Throwback

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This post was originally published earlier today for member inside 12631, a trading service in The PPT. Click on the 12631 hyperlink for more details.

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Objectively speaking, trend lines drawn on charts are most valid when the chart actually has several “reactions” or touches of them. Otherwise, anyone can draw any squiggly line they want out of a given bullish or bearish bias, with it not helping your analysis and in fact hurting it.

The S&P 500 marginally broke out from the symmetrical triangle I had been discussing on my recaps last week. With weakness in stocks and the Euro today, there is a distinct possibility for a “throwback,” or a retest of the resistance trend line from which price broke out. That equates to a retest of roughly 1250. There is nothing inherently bearish about a throwback. However, taking for granted that the retest will automatically hold amounts to complacency. Hence, I am watching this area closely to see if it survives the throwback.
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