Sunday, March 1, 2009

Stock Market S&P 500 to Continue Large Drop If We Break Important Levels.

S&P 500 Level of 741 is a very important technical support level. It is the major bottom in late 2008. It is also very close to the major bottom of the great bear market which ended in 2002.

In the chart above, we notice the importance of the S&P 500 level of 740 to 760. We also notice that in 1995, the slope of the chart increases at an unsupportable rate. It was during this time, that the mantra "buy the dip" was used with great success.

However, starting in 2000, the Bubble burst going down to S&P 500 level of 768.

From 2002 to 2008, we had another Bubble (credit, housing bubble), and it burst again, and went all the way down to S&P 741.

This major support area of S&P 740 to 760 has to hold. If it doesn't, then there is not much support all the way down to S&P 500 level of around 500 (1995 levels). There is not much congestion between the the S&P 500 level of 500 to 740, and support will be hard to find.

This bottom of S&P 500 level of 500 is consistent with this blog's target of S&P 500 level of 450 to 600.

On Friday, February 27, the S&P 500 closed at 735, below the important level of 740 to 760. This may be a sign that we are continuing to head to the lower S&P 500 target. If the target is S&P 500 level of 500, that is another drop of around 47%.

60 Year View

Notice that in the 60 year view, the trend line shows a support level starting at around 400, and as time passes, the support level would increase. This is close to the lower S&P 500 target of 450 to 600.

So from 1995 to 2000, we had the "Buy the Dip" Mantra. Now, as we go back in time to 1995 S&P 500 levels, we will have the "Sell the Rally" strategy which should work in this market.

Today's Stock Chart

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