When markets breaks a floor (a support level) that market will tend to fall to the next floor (the next supprot level) which happens to be the 700 area,,which by the way is ALSO the target of the double top! Funny how that works. Again, when a market breaks through a support level (think of support as a floor) it will tend to act like gravity in the real world! It will likely fall to the next support level or the next floor.
The next question will be, will the next support level at 700 hold or will that eventually fail and go to the NEXT floor at 55? Only time will tell and i have no idea but by putting a protective stop above the last high you can milk the downtrend for all its worth.
Its the same with resistance, when a market breaks through a resitance level (thin of resistance as a ceiling) it will tend to go to the next level of reistance (the next ceiling),,then all the BIG MONEY keeps an eye on it to see if it can break through,,if it does,,then the big money drives the price to the next resistance level. If the market fails to get through the next resistance level then it will tend to come back down to the next support level,,then the big money waits to see if it will break or hold...if it holds then odds are good that it will go back up to test the previous resistance level and the market bounces up and down between support and resistance forming a nice sideways channel.
Big money is ALWAYS keeping an eye on support and resistance levels to see if they hold or fail,,this is the whole psychology behind the notion that: SIDEWAYS MARKETS GIVE WAY TO TRENDING MOVES.
Again,,the BIG MONEY is always looking at support and resistance levels to see if they hold or breakout...gold almost made it to its high last month but failed...the big money seen this and went short, regardless of fundamentals,,,they went short.
This is how to make money in the markets, but nobody beleives that it works because of one little problem....its too easy! Our emotions and human nature wont except such an easy solution to successful trading, so most people shrug it off as nonsense.
This theory isnt right 100% of the time, nothing is, but you only haveto be right 50% of the time to make good money trading, as long as you have good money management and GET OUT when you know ur wrong. Also just an important is letting your winners RUN when you are right! If you long a market put a protective stop below the last reaction low, since the definition of a bull market is "Higher highs and higher lows" it simply should NOT violate a last reaction low. Yes once and awhile you will get jabbed and the market continues in its uptrend,,in those cases just cose your eyes and get back in.
Big money sets the beginning and the end through volume control. They don't need technicals because they create the channel whose end points you have to figure out with your charts.
Don't fool yourself with your trader religion, stick to your previous insight and detach from the rationale that you despise, because there is none for you to operate on other than timing. It's all small-time gospel. Market control does not need chance to work. Control is absolute and those with the most credit and leverage own it.