I love the reaction this morning when the market just dropped before the open. WTF happened they say. I love the remark afterwards. I predict a lower open. I know the guy was saying the latter in jest. But what are the technical reasons for the sell and why was it so aggressive?
The distribution started on the 3/27, long before we got the highs. If you look at the hourly, distribution started on the 25th, but that shouldn’t surprise you, because momentum will change on the lower time frames first.
One of the key levels was tested first in are #1. The low of the 3/29th tested a support. Afterwards we pop up to the highs of April 6. Now as you can see, the leg up, (yellow line), your price action started to move sideways. A clue that distribution may be setting in. Another clue, is that your price got higher and higher on lower MACD. We know that is distribution.
By the time we get to the 4/14, we test the low of 3/29, we should surpass that, because we are still in the distribution process. The progression we noted from 3/27. We will test the 3/29 low and fail lower to the next level of support. Thus we are in the #2 area. As we hit the #2 area which is 1298.25, it is our first test. Progressively, from the 3/27, and noting the leg up, we never tested 1298.25 once. So on this test, you will pop! Basic technicals again on how levels are gained or lost.
Now, this facilitated the draw that we experienced today. And where will distributions take you? To the start of the leg up. Area #3. Do you see the doji candles on the 3/23 5:00pm est?
For those who like perfect HNS, this is a really ugly HNS. I love ugly chart patterns. What is the right leg of an HNS? It is a bull wedge. So when it hit the level of support at 1290.25, for the first time. We will pop! And this is how levels work in context and how you use the legs to your advantage.