Here comes another chart.... this time, it is a big kahuna, the S&P 500, which is represented in its trade-able form, the SPY.
We can see a brutal down trend that began on January the 28th.
Today, February the Second, we can see a glimmer of hope, the downtrend momentum seems to be breaking up; the mid-day high was a pretty strong bounce. The bounce actually popped up to the 20 period Moving Average (ma) before retreating.
This is exciting for several reasons:
1) Price has not touched the falling 60 minute 20 ma for a couple of days
2) The mini rally broke the momentum of the downtrend
Since momentum has been broken, we can expect some chop while waiting for Price to indicate a new direction. It could go either way but the bigger picture is down.
All of that to say, more than Price can serve as support and resistance; often certain indicators will have that effect. In this case the 20 ma did the trick. It is a major psychological barrier and a powerful tool that we can use. I like to watch that ma line for market direction (is it generally heading up or down?) and, of course, support/resistance. The 50 ma is also very powerful. More on that later!