Previously, we reported on the recent move lower in the S&P 500 (SPY  ) which broke through its uptrend. Since November of last year the SPY has moved higher in a perfect trend where one can draw a line connecting all of the lows. Each time the SPY would pull back to that line, buyers would diver in, anxious to profit from the next move to new highs. Until last Thursday when the trend finally came to an end.

Technical traders use one of two ways to identify that a trend has come to an end. The first is to have one day where price moves below the trend and then closes under that trend. This is one of the most common ways that automated systems are programmed to understand the end of a trend, and it is one of the first lessons taught in any educational seminar. The other way is to see price close below the trend and then to have the next day close below as well. A "two day close" confirmation if you will. In either case this is exactly what we have in the SPY.

So what happens after price breaks an uptrend? The chart of the SPY as of now is a picture perfect example. Notice how, since last Thursday there has been an attempt to move lower, then an attempt to move higher and then a series of "nothing" days in-between where price was directionless. This is VERY typical of a product that has broken trend.

Being able to identify a trend is something every trader can do in their sleep. Being able to understand what it means to see a trend come to an end is also quite easy to understand. Studying what happens after everyone agrees that a trend is broken is a science that very few spend time on. Learn how to handle yourself in a trend changing environment and you will have a skill set combination that very few ever achieve.