Richard Donchian was a futures trader, that’s credited with creating the popular Donchian Channel Indicator. Richard Donchian is recognized as the father of trend following.
The Donchian Channel is formed by taking the highest high of x length of time, and the lowest low of the same x number of days, then marking the region between those values on a stock chart.
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Keep your eyes on $242.40 support on SPY. The 10 minute chart looks like we’re going back to test this important support level.
The Twiggs Money Flow shows heavy distribution took place today so a sell-off is underway. The question is, how deep will the sell-off be? The 10 minute chart shows support at $242.50 and so that will be the first level to watch.
On the weekly chart, Effective Volume and the Twiggs Money Flow still look bullish. There is a support zone ranging from $239.59 to $242.93. This zone is formed by a combination of multiple trend lines. There is also support at $227.59 from a trend line in the weekly time frame. Finally, there is a a support area at $208.54.
The daily chart of SPY still looks fairly bullish although we have uptrend line support broke today. Again, $242.40 is the support level to watch tomorrow. The Twiggs Money Flow and Effective Volume look bullish in the daily time frame as well.
A huge sell-off today took place in Transports so watch for a red AROON spike up to signal further weakness in this bellwether sector.
The SPY chart has formed an inverted hammer which confirms some type of retracement is underway. The long upper-shadow shows selling and distribution into the upward move.
Will this be another headfake like what happened on the Russell 2000? I have added Fibonacci retracement levels on the chart and the important zone to watch is 242.50 down to 242. We want to see if the previous resistance of the uptrend channel becomes support.
The RSI shows that SPY is overbought as it kissed the 70 level and is now falling which also suggests a retracement is underway.