TheTrendLineInvestor

Let's Take Friday's Market Drop Into Perspective...

AMEX:SPY   SPDR S&P 500
Yes. The Dow dropped about 400 points and the S&P 500             dropped about 55 points on Friday. As bad as it sounds and feels, let's take Fridays market drop into perspective.

Since 2012, the SPY             was about 125... Since July 2016, the SPY             has been above 212. If you really think about this, the market action             that took place on Friday was a drop in the proverbial bucket. The SPY             went down about 5 points on Friday....

212 ish - See the horizontal gray line
For quite a while, the 212 level in the SPY             was resistance. In July, the SPY             got above the 212 level. Remember that resistance often becomes support. So that means "there is a chance" the SPY             is just coming back to 212 to bounce and continue higher :) Yes. I have been called an optimist in the past...

2016 Uptrend Line - See the upward sloping green line
The beginning of this line is back in February of 2016 when the SPY             was about 180 ish             . No one knew this line would exist back in February. It wasn't until the end of June that we got the second bottom, around 198 ish             , that allowed anyone to see this line take shape. Let me make a quick point here. Please notice that the February bottom occurred very close to the "181.0 ish" line that was drawn on this chart because it was a level that was resistance and became support. The late June bottom also occurred very close to the "198.50 ish" line that was also a level that was resistance and became support.
With all that said, it is possible the SPY             will come back to this green uptrend line before it is ready to turn back higher. If that is what will happen, you can expect to see 209 ish             on the SPY             . That would be another drop of about the same magnitude as we saw on Friday. It may not happen in one day again but the SPY             could get down there. If you are with me in my line of thinking, please notice there is a resistance line that became support in that area. It is labeled "208 ish" on the chart.

Below the Horizontal 212 ish             line & Below the 2016 Uptrend Line
Let's just say the SPY             gets below these two areas and just keeps dropping. You can continue to look at past levels of resistance that became support. Those levels may give you an idea where the market could turn around.

Don't panic. Take each day as it comes. Learn to gauge the market's future potential on the market's past. Horizontal or sloping is your choice.
There are many opportunities being created for long only investors. The drop that is creating long opportunities is in itself an opportunity for those willing to short.
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