Wall Street Never Fails

In my last update on the market posted at 2:23 pm, I said, "The SPY and the bearish ascending wedge mentioned earlier. I'm a little surprised we didn't see an upside breakout before the downside break down."


Guess what?

15 minutes after I wrote that, the market did it. That is how predictable these market reversals have become. For new members, the reason they do this is simple. Technical analysis has taught us that an ascending wedge like the one above, "should" break down. When you get a breakout above the wedge it's considered by technical traders, a failed pattern. TA also has taught traders that they should reverse position on a failed pattern, that means they would have gone short on the break of the wedge, it's what they expected, but when a breakout above the wedge occurs, it's a failed pattern, they should cover their short and go long. There's several different ways the market makes money off this scenario, but what's important is that longs were trapped at higher prices and when the market fell again, they're forced to take their loss, which increases supply in the market and lowers price, it literally kick starts the move down. This scenario plays out in all kinds of different patterns every day, both on bullish and bearish moves. Just be aware of this, it happens too frequently not to be.