Close only counts in horseshoes and hand grenades and the money shot

$162.80! Yes that was the SPY support number pulled off our good ole PnF Chart last week and it came into  play today.  Having these numbers in your back pocket on days like today when the pre-market futures are looking ugly and those that got caught long at yesterdays close had their dreams  dashed of fast cars and hot chicks while quoting cool 'Fast and Furious' lines such as 'I live my life 1/4 mile at a time' could of made more informed decision.   Especially within the first 10 minutes of the market opening when many of them likely sold right at support (the low was $162.74) only to see it rally strong thereafter.    Unfortunately, because of commitments I was unable to post my thoughts yesterday which may have shed some light on today's decline.   So I guess you have except the following 20/20 hindsight analysis I'm about to provide!  This is why I'm never wrong! 

The daily chart below marks the $165 and $162.80 horizontal support and resistance areas we spoke about last week.  Additionally, I've added the 20 day moving average.  Just like the 50 day moving average I posted about here the 20 day moving average (dma) is a widely watched and used moving average by investors and traders alike.  So now we have a double whammy of resistance yesterday with both the $165 area of resistance from our PnF analysis and the 20dma ($165.01).   We can see from the daily volume that it was the lowest in three weeks.  The volume is sending us a message here.  I've been hammering home that support is where demand overcomes supply and resistance is where supply overcomes demand.  Our primary indicator of supply and demand is volume! Therefore, in order for support to be broken supply must overcome demand (the intelligent will realize that is the definition of resistance) and for resistance to be broken demand has to overcome supply (this is the definition of support).  The lack of volume and price closing below the $165 level meant lack of demand making a pullback highly likely.  Now I'm not going to tell you that I knew it was going to drop (although I did and it did) and of course drop back to support. This simply highlights that knowing where key support and resistance areas are ahead of time and understanding the relationship between price and volume can lead to trades with a higher probability of success. 

That is all for today so go out and find Vinny his 10 second car!  

Thanks for reading!