The Long-Term View

An interesting intellectual exercise would be to try and figure out where the current bear move is headed to, level-wise. You will read in most books on technical analysis and in particular in the old classics that you should always keep all your trendlines on your charts, no matter how old they are. A trendline that may today appear totally irrelevant because the price has deviated a great deal from it just might become relevant again in the future, should a spectacular move occur.

The chart above (click to enlarge) is the weekly SPY going back to 1999. Before saying anything else I must point out the spectacular double top March 2000/October 2007. This particular double-top might one day be exhibit number one in any TA book dealing with the formation. Moving on, I traced a line connecting the lows that started the 2002-2007 bull market, lows that were reached in 10/02 and 03/03. The market took off from there and that line has never come into play again....yet. Note that 2 points make a line in geometry but you need 3 lines to make a TA trendline. So I was thinking it not a ridiculous idea to consider this line a potential intermediate support in the coming months (or weeks as we might find ourselves sitting on it sooner rather than later), which would take us somewhere around 115 (value to be updated, this goes without saying).

Now, the market could rebound off that line (a legitimate trendline at that point) and we might have a bullish resurgence from there (stranger things have happened) or the market could dead-cat-bounce on the trendline then resume its hellish descent and be on its way to go checking out those historic 2002 lows (the official intraday low is 76.72 reached on 10/10/2002). Again, much stranger things have happened since 05/17/1792 and the Buttonwood Agreement but that's taking the long-term view a little too far.