S&P 500 Index Technical Analysis

I get this question very often during my seminar and training. I tell market leave clues, history repeat itself,nothing under the sun is truly new.

Let look at the last bear market and it will give us a good indication where the market is heading.

First thing let us pull up the S&P 500 charts. Uptrend line was broken 10 Jan 2008. This is a trend change from bull market to bull market. This is not a 10% correction.

SP 500 trendline vs Russell 2000

Now let look at the Russell 2000 , most people know the SP500 but is not familiar with the Russell which is the small cap index . The Russell broke down 2 month before the SP500 in Nov 2007. So is it possible we can tell the future of SP500 from the Russell. Now let’s see what happen recently.

Below is the SP 500 chart in recent months. The uptrend is still intact we are still far from the breaking the longer uptrend line. However , the short term uptrend line is broken in early Oct 2014, Maybe the Russell 2000 will give us a better picture if what we assume is correct; that the Russell 2000 lead the SP500.

Now let’s see the Russell 2000 in recent months.The longer term uptrend is still intact, however the shorter term uptrend line was broken in Jun 2014. In fact is forming a series of lower high. So the question remain where do you think the market will head. I say look the Russell. So far Russell indicate the SP500 will go lower. Yesterday the Russell price action was quite bearish. If the Russell break below long term uptrend line ,I think the SP500 will follow.

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