Will There be a Breakdown of Trendline Support?

Schaeffer's Investment Research
  OCT 25, 2012 8:58 AM

Take a look at some technical analysis of the S&P 500 Index, the S&P MidCap 400, and the Russell 2000 Index.


After Tuesday’s plunge, I have seen many with a bearish view discuss the break of trendline support, specifically on the S&P 500 Index (INDEXSP:.INX).  One vulnerability to chart reading is that if you have a bearish or bullish predisposition, you can make the interpretation of that chart fit your view.  I have had a bullish view for months, although I called for choppy price action a few weeks ago.  That said, my chart work tells me to “stay pat” with my bullish view, and one of the factors is that major indices -- such as the S&P 500 Index, the S&P MidCap 400 (INDEXSP:SP400), and the Russell 2000 Index (NYSEARCA:IWM) -- remain above trendline support.  I discussed the MID in detail on Tuesday in real time as it was testing support. Perhaps my time frame is different than those interpreting the charts bearishly, and I am open to the fact that the technical backdrop could change unfavorably for me. But for now, I don’t see the breakdown that some technicians are referring to. See the charts below.

Trendline Support: SPX just below 1,400; MID around 970; RUT around 810

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This article by Todd Salamone was originally published on Schaeffer's Investment Research.

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