BREAKOUTS CAN SUCCEED OR FAIL
We all want a clean breakout and then a push higher. Unfortunately, that is not how it always plays out in the real world. A successful retest of a breakout attempt can (1) drop back and stay above the orange boxes, (2) drop back to the orange boxes, or (3) drop back into the orange boxes before pushing higher. On a successful retest, the important common factors are (a) breaking out, (b) dropping back toward the box in some fashion, and (c) making a higher high above the most recent previous high. In the real world, there is no neat textbook definition about what a successful breakout looks like.
ONE EVENT vs. WEIGHT OF EVIDENCE
Since, in the short run, it will have little impact on the bigger (and much more important) picture, experience says overthinking breakouts tends to be a distraction. No single event makes up the weight of the evidence, including the outcome of a breakout attempt.
SO FAR, SO GOOD
Heading into Wednesday’s session, the breakouts on both versions of the S&P 500’s daily chart are holding. All things being equal, bulls would prefer to see them hold. However, if they fail, it will not significantly alter the bigger, and still constructive, longer-term outlook.
These comments apply to our approach and our timeframe.