Don't Ignore This Chart!

What Matters Most for the S&P 500?


The S&P 500 is in the midst of one of the strongest and most consistent trends ever. The chart below shows the S&P 500 twice. The top window shows the index with a 7% Zigzag indicator in pink and the bottom window shows a 10% Zigzag. The Zigzag indicator filters out price movements that are less than the parameter. As the top window shows, the S&P 500 has experienced just four 7 to 9 percent pullbacks since October 2011 (blue arrows). Even the plunge in October 2014 did not hit the 10% threshold. 

The bottom window is even more remarkable because the 10% Zigzag is a straight line from October 2011 to May 2015. This means the index has not seen a decline greater than 10% since September 2011. This is clear evidence that markets can trend and can trend for a long time. In addition, the market does not always correct when it is overdue or overbought. This streak is indeed rare, but it is not unprecedented and the second chart shows an even longer streak. 

Click this image for a live chart.

The current streak is around three and a half years without a pullback greater than 10%. The second chart shows the S&P 500 advancing from October 1990 to September 1997 without a 10+ percent pullback, which amounts to a seven year streak. I am not predicting another 3 1/2 years without a 10% pullback, but anything is possible and the trend is what matters most.  

Click this image for a live chart.  

And finally, here is a link to the webinar from Tuesday, May 19th. 

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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