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Charts courtesy of stockcharts.com

Sunday, October 5, 2008

The Longer Term Picture

Stockcharts.com is probably the best free resource for market information on the web, but it has a limitation on it's free charts: They only go back 3 years. I wanted something that could go back farther, and also give me the technical indicators I need. I found one at incrediblecharts.com, which is a downloadable charting program that gets it's data from historical quotes on yahoo finance. I choose that because it has a fibonacci retracement tool like the one one stockcharts, and I could go back to the October 2002 lows. Here is the SPX with fib retracements from the Oct 2002 low to the Oct 2007 high, with chart support lines drawn in. The chart support comes close to the fib lines. Notice how the SPX got a weak bounce off the 50% retracement, and appears to be headed for the 61.8. I drew a trend channel using the August 2007 low (which was when this mess really started). The SPX has broken down below the bottom of that channel, which is not a good sign at all. The 61.8 retracement and the 2004 low are pretty close together, so that could be a do-or-die support level, break that and we could concievably go all the way down to where we started, October of 2002.

The Nasdaq composite is sitting right on the 50% retrace level, as well as the bottom of the trend channel. A bounce here is quite concievable. However, I don't expect it to go very high. Ultimately, I think we are going to test the 61.8 retrace before the end of this month.

Thee Russell 2000 was looking like it was trying to bottom out at it's 38.2 retrace, finding support again at the summer 2006 low, but then collapsed this past week, and is probably going to test the 50% retrace.

The stock market is declining for one reason, and that is the same reason the housing market is declining: It is overpriced. No amount of Government meddling will change that, it will only prolong the agony.

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