There are two scenarios:
1. IF History Repeats…
If history repeats, THEN we will see a halt of the market rally here and a turn back down in a sell-swing that could take the market all the way back to 1,040 in a similar fashion as the sell-swings in June and August.
2. IF Price Breaks Out…
If the “Third Time’s a Charm” results in the market actually breaking upwards above the key 1,130 resistance level, THEN you can expect this market to surge – potentially very violently in a vicious short-squeeze – back to the overhead price target of 1,170 or even as high as 1,200 or beyond.
Yes, no matter what you believe, think, or what the charts are showing, the S&P 500 could indeed rally to a new 2010 high within the next few months.
It’s like the Mark Douglas principle: “The market can do anything” and if you turn a blind eye to the bullish action because you believe it absolutely can’t happen, then you will first miss an opportunity to trade a breakout play long, and second, more unfortunately, you WILL lose money if you fight this market by shorting it as it breaks out… IF it breaks out.
If history repeats as everyone thinks it will, then you short the move and make money as price falls. Simple.
But if you get caught up in your believe that the market HAS to fall and then the market breaks out above 1,130 and travels to 1,170 and perhaps to 1,200, then your inability to plan for that possibility in your analysis and trading could leave you devastated.
Remember, no one knows with 100% certainty what is going to happen next – and as traders, it’s our job to PLAN for possibilities and then trade them when we get triggers or entry/exit signals.
Scenario 1 or 2 will happen – resistance WILL break or it WILL hold. It can’t be both.
http://blog.afraidtotrade.com/the-game- ... -spx-1130/
