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Recall way back when (about a week ago), when I flagged that cup and handle bullish setup for you on the 30-minute timeframe of the SPY, actively traded ETF for the S&P 500 index. We soon got a huge breakout from that pattern, and have drifted higher even since. If the bears can build on today’s weakness, I would be watching for a throwback, or retest, of the neckline from that cup and handle pattern. Note that we did not immediately retest it once we broke out.
It is very important to keep the shorter versus intermediate-term timeframes in mind. On a day like today, you might feel smart saying “we are in a downtrend,” but the reality is that the intermediate-term trend has not even suffered minor technical damage yet. That is not to say that it can or will not. However, keeping a clear perspective is important. Otherwise, you will be disorganized in your thoughts and approach to the market, which will adversely affect your trading.
A mere retest is not bearish, as we have seen plenty of times in 2012. Backing and filling is part of a trend, and further selling by the bears, if they can muster it, would set up a major test at $138.
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