Friday, October 24, 2008

Running out of wiggle room

For the past two weeks, the S&P 500 index has wandered between a declining tops line and a (presumably) lower support line at 840.

One of these limits will be broken in the next week or so. If the index passes above the declining tops line, then that would signal that the 840 support line will last for a while. A dip below the 840 support line, however, would open the door to further losses.

In early August the chart pattern was the reverse of this, with a resistance line at 1292 over a rising bottoms line. The S&P 500 actually did a head fake in that case, as it rose through the resistance line on August 11 before turning around and beginning the plummet that we're still in today.

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