Monday, November 17, 2008: The S&P 500 is at 850.
The Stock Market as represented by the S&P 500 has been holding the support level of 839 successfully.
Looking forward, what if we break below 839?
The next major support is at 768, which was established 6 years ago on October 10, 2002, and the stock market is most likely going to bounce around this major support area.
But can we think the unthinkable?
What if the S&P 500 Breaks the 768 Level?
If the S&P 500 Breaks 768, the Stock Market is in big trouble, as there is no solid support until the level of 500 on the S&P 500, a drop of 35% from 768, a drop of 41% from 850.
From the chart, aside from seeing the major support area of 768, we also notice that from 1995, the slope of the Chart increases to an unsupportable level, ending up in the Bubble of 2000. The Stock Market had no time to rest from 1995 to 2000, and there was no time to consolidate. This lack of stock market consolidation does not provide any good support for the market as it falls below the 768 level on the S&P 500. This could potentially mean a large drop (over years?) if the S&P 500 drops below 768.
View from a 60 Year Chart
Looking at the 60 Year Chart of the S&P 500, we notice the 60 Year Trend Line hits the S&P 500 level of around 400 at this time. If we look forward over time, this trend line would approach 500, which coincides with the predicted long term support level above.
Today's 15 Year Chart
3 Year Chart of the S&P 500 Index