Since the start of April, the stock market has been going sideways. While it is completely normal its also frustrating – we want to get on with making profits!
Technically, this is called consolidation, and we have a good example of a line of resistance. Three times SPY has bounced off almost exactly the same level: 7 May $422.82, 10 May $422.74 and 1 Jun $422.72. Its amazing how similar these numbers are, which shows that traders tend to think alike, and get cold feet at exactly the same time! When the SPY does eventually break $423 then that is termed a breakout and it should continue its upward trajectory.
It strikes me that this is very like a Darvas box. If you haven’t read How I made $2,000,000 on the Stock Market by Nicholas Darvas (1960) then you may want to. He was a world-famous dancer, and starting with $10K he made $2M within 18 months. It’s a fascinating read, and people still use his system today. There’s a link to it on Amazon below (and disclosure: if you buy it from the link below I will get a whole 38 cents – woohoo!)
