A Quick Lesson

I often tell you that a head fake (a false breakout, etc.) is usually one of our best timing signals, they tend to precede the reversals we are looking for.

In one of the last market updates I showed you a negative divergence in the SPY (also in the other averages) that I thought would turn the market down, which it did. However, make a mental note of the head fake effect as a timing signal, both on a micro basis-like this intraday turn around and on a macro basis, as in the pullback I've been expecting in the market before it will move higher. The false break seems to be one of the best timing signals for such reversals.

 Here was the 1 min negative SPY divergence from the last update, note 3C is lower at the daily highs.

And those daily highs just pierced yesterday's close, briefly turning the SPY green and likely triggering a flood of limit orders/stops. Since technicians understand resistance and support as exact levels, rather then areas, the had fake can be done with only a move of several cents.