More on the S&P500 trend line break

by Malcolm Pryor on 27/11/2012
After last weeks 3.6% close to close up move in the S&P500 index a lot of bulls may well be feeling a lot more comfortable. The attached weekly chart shows that there is still more work to be done for the bull case to be firmed up. A major trend line drawn to connect the October 2011 and June 2012 lows was broken earlier in early November. Extending that trend line forward we can see that last week's price action represents a test of that line, ie price has come back up to around about where the extension of the line now is. That is a common occurence after a trend line break, and leads to one of two outcomes: 1) price bounces back down off the extension of the trend line 2) price gets back up above the extension of the trend line. For the bull case to be fully restored price needs to get back up above the extension of the trend line.


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