I want to emphasize that the upper and lower lines are not completely arbitrary. They are equidistant from a linear regression fit to the S&P index data since July 9th or so. And the market has set the slope of the trend line, and the early peaks have set the width of this bigger channel.
The fact that we can find support along the invisible line in the sand weeks later tells me I'm not the only one looking at this. The line can be violated, sure, and if it is, we know we have an event which is beyond the extremes of the last few weeks, which is a big deal to be concerned about for any long postions, and possibly a signal to go short.
But if the lines hold, well, that tells you something different about sentiment and the value of this channel as a predictor as well.
As for the middle zone, one can use shorter steeper channels to define movements across several days, and also 5,8,21, 34, 55, 89, 144, 233, 377, and 610 period moving averages on 5min , 15min, 30min, 60min , and daily charts to look for support/resistance. When one of these lines line up with fibonacci support/resistance across some similar time frame, the setup for a reversal is in place. Its like looking for a needle in a haystack sometimes, but I can't say how many times recently I've analyzed a bad entry/exit and found a good reason in these simple support/resistance lines to come up with a better decision. It just takes patience, practice, and discipline, but the roadmap is waiting there ready to reveal itself.
Here's a near end of day update...things are looking good so far for bulls, and my insanely overleveraged long SPY call position which is coming back on me...hooray!
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