Technically, This is Where I Think the S&P Will Find Strong Support and a Final Resting Place

Technically, This is Where I Think the S&P Will Find Strong Support and a Final Resting Place by David Haggith for The Great Recession

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S&P 500 Crash Target 2000

This graph shows where my mind goes every time I ask myself how far the S&P 500 is likely to fall before it finds a solid bottom.

As you know, I don’t make predictions based on charts, but clearly there is intense convergence of longterm support around the 2,000 level and strong indication of a subliminal desire in the market to keep plumbing the bottom to find that depth.

Dave-Portnoy daydream traders notwithstanding, this is where the market’s undertow wants to pull it. I’m not saying it will get there, but that is the level at which the stock market would finally find substantial technical support and possibly economic convergence. The economy, at present, would strongly support stocks at that level … unless the economy falls further; then even that level could look overvalued.

Just one more chart

If the economy goes lower (more unemployment than where we now rest and continued decline in overall GDP (not GDP growth rate), here’s the next lower level and likely ultimate rock bottom. As you can see, the market’s longterm trend PRE-Fed rigging would support a slightly lower level as the maximum return to trend.

The strong support reflected in the first graph will probably prevent that from happening; but this would be the worse-case scenario, provided the earth doesn’t get hit by some greater natural castastrophe than what we have already seen. At the 1,500 level there is tremendous support, even without Fed interventions.

Of course, there is also the imaginary line one could draw straight across the bottoms of the last two recessions (S&P about 800); but we’ll leave that worst-case scenario for something like a major asteroid impact because those levels were established by where the market found proximate support from its PRE-FED trend line, busting slightly slightly below the line the last time but then recovering to bounce along that trend line for the next two years.

That’s all. Just a couple of snapshots this time of the possible paths ahead to keep in the back of your mind, which is where I keep them.

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David Haggith

Knave Dave — vigilante against the false profits of The Great Recession Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts. Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?