Market Psychological Levels
Taken from investing.com on 7th Feb 2018.
This is a proxy to the actual DOW FUTURES. But it’s good enough to see that the plunge was arrested at a consolidation level of previous and the rebound tagged another consolidation level.
Concepts of Resistance and Support are founded on the basis of human psychology. They will remain applicable and timeless to be relied upon for eons to come.
Resistance once broken, becomes a support in future and the same applies for support. People who have missed out on selling at a particular price level come on out to join those who target exiting at resistance levels to form a big group of sellers for a given price level (Resistance). People who have missed out on buying at a particular price level come on out to join those who aim to cover their short positions (buy back) to form a big group of buyers to form a price support level.
When the cash market and the futures market are open concurrently, their price movements are in sync otherwise an arbitrage opportunity exists. The futures market outside of cash trading hours fluctuate and react with new developments in latest financial information to give indication whether there will be a price gap in the next cash market session.