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LONGER-TERM VIEW OF THE S&P 500

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The monthly S&P 500 bars show why it's important to keep an eye on percentage retracement levels -- as well as chart levels. I've shown this chart before, but it's worth showing again. The 2003 S&P rally not only stalled at its early 2002 peak (near 1177) but after having retrace exactly 50% of its 2000-2002 bear market decline. Assuming the S&P breaks its 2004 low, it's logical to assume that it could retrace anywhere from 38% to 50% of its 2003 advance. Based on the retracement lines shown in the previous chart, that would call for a possible decline to the 1025-975 region (see box). That means that things will probably continue to get worse until they can start to get better.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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