S&P500 Trendlines Extended

• Posted by JC Parets
• on January 10th, 2012

I was taught early in my career not to disregard my trendlines once support (or resistance) is broken. More often than not, these extended trendlines come back into play at some point in the future.

Now remember, we like to draw our trendlines with crayons and not sharp pencils, so we use this strategy to find potential ‘areas’ of support or resistance. This is a logarithmic chart of the S&P500 with two former trendlines that I extended:

 

And here is a closer look:

The intermediate-term red uptrendline matches up the 2010 peaks with the 2011 troughs. It was finally penetrated around the holidays after failing at every attempt throughout the Fall.

The Longer-term blue trend-line takes us from the 2009 July lows, up through the 2010 summer lows where the market found support in June and then again in August. This trendline turned into key resistance this August and is coming into play once again today.

These trendlines are supposed to be drawn with crayons, and theoretically should be a little bit thicker, but I think the charts still get the point across.

Remember to extend your trendlines.

 

Tags: $SPY

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