Technical Commentary
For the first time in quite some time the S&P 500 has given us a significant sell signal. The breakdown this week under 1,480 we consider very dangerous. We also note some important developments on the weekly charts. The entire move from the March 2003 low now hangs in the balance. The trend line is at around 1,445; the August lows did take out that trendline with a low at 1,370 but it failed to hold. Another break now will be fatal. These long-term lines are very important. We must never break them if we are to maintain the trend of the market.
We saw what happened when the up trend line from the 1994 lows was broken. That triggered the 2000-02 collapse. It is also significant that that collapse broke the up trend line from the 1987 lows. The current market has been restrained on the upside by that same trend line. It took it out on occasion, but basically it could not maintain any sustained move through the line, and over the past few years we have traded continually on either side of the line.