It isn’t difficult to accept that we are now in the midst of a massive “unwind”, predicated on a massive shortage of lending (capital). Thus, when fundamental valuation or rationality are forgotten, technical analysis can offer insight into near term movements in prices.
If one believes in technical analysis, or “charting” then the next major resistance point on the S&P 500 would be at the end of a long term trend line starting at the end of the recession in the early Nineties, bound to the trough of the market drop in 2002. If this were true, it would indicate that the next hard bounce should occur when the S&P Index reaches approximately 1010 or approximately 8% south of Friday’s close.
If this crisis continues in the months ahead, despite the passage of the bailout yesterday, or if panic ensues, the next technical stop may be around 920.