Sometimes in trading, it’s more important how little you lose than how much you make–which is a benefit I’ve learned from Alex & Kerry and Spike Trade over the years. Many times Alex & Kerry have pointed out key turning points in the market; points that if you heeded their warnings would have saved you a ton of money. We may be reaching such a point now, and both Alex and Kerry have mentioned the market’s heaviness and lack of upward mojo.

This struggle to form a top after a multi-month run is also playing out on the chart patterns. As you can see the SPY may be forming a 1,2,3 Top on the weekly charts–a rare and powerful trend reversal. The #3 point has not been formed yet, and it won’t be confirmed until we close below the previous week’s low; however, we’re probably forming that # 3 point now. On the daily, the 1,2,3 Top pattern is a little more subtle since it is trying to reverse the up move from early February. The pattern on the daily is a 1,2,3 UT, with the #3 overshooting the initial, or #1 spike. Confirmation for the daily pattern would be a close below the #1 high or below 110.80. In any case, now is probably the time to tighten stops, trim long positions, or learn to hedge a long portfolio with inverse ETFs or index puts. Trading is all about finding edges to exploit, and knowing that a major trend reversal may be imminent is a definite edge.