S&P 500 Long Term Trends
After 3 consecutive days of writing earnings results, its time to take a good break. Fridays relatively large fall in the US market interests us to take a look at the trend.
I usually favor S&P 500 more than the Dow Jones Industrial Average (DJI) simply because the index provides a broader look at some of the biggest companies in the world and that DJI is much narrower focus.
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Back on Wednesday, I identified the Jan 29 Short term top as an important indication for intermediate term trend. On that day, it failed to break through that resistance at 1400. A double top formation have emerged which is bearish for the short term.
MACD looks to be turning down. Observed the green channel that i have highlighted. That should form an important support at 1255. That would present a 6% fall from Friday’s price.
Will it hold? I am gravely unsure here. If you look at that chart, there is so many head and shoulder formations on this 2 year chart that the measurable downside looks to below that 1255 support.
While I am not a short term opportunist, I am more interested in the longer term outlook, specifically next 2 years. This chart above seem to point to a lower target. The probability of a V Shape Rally is looking bleaker.
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Here is a 10 year chart going back to 1998. Notice that back when the bottom was formed in 2002, the RSI reading was around 20-30. We are still far from it. Going by the duration how long that 2001 - 2003 bear takes to take RSI down to 25, this time round we might even go below that.
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Here is a 20 year chart goign back to 1988. It becomes clear that the lower boundary of the green channel depicts a rather long term support. Which is why if we are bullish going ahead for the next 3 years, THAT SUPPORT BETTER HOLD. Here we get introduced to a white line below the green channel. Whats the significance of this?
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This is an All Time chart taking us back to 1928. Notice that this white line passes through many lowest points in US stock market history. Assuming our support at 1255 doesn’t hold, any of the likely target below is going to be dire. whether its 900 or for the matter 750! Thats a 43% loss!
At this point, 1255, 1150 becomes very important. For long term investors who hopes to add to your position, this might present a good opportunity. however, it may well reach 750-800 region. What kind of big shit could take it down to that level?
Please give your comments as to whether i am overlooking any thing else.
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