Following a series of closing highs last week and the index's first intraday breach of the 1,900 level one is inclined to ask: how much longer can the S&P 500 can sustain its uptrend? If charts are anything to go by the underlying trend is here to stay.
The S&P 500 weekly chart shows a strong trend with each upthrust target defined by the width of the trading bands. The market has broken through the consolidation around 1850 and the trading band calculation provides a target near 2000. Chicken Little is frightened of heights and terrified the S&P 500 will fall. Do the charts support this fear?
Individual stocks can and do collapse suddenly and without warning; it's in the nature of company risk. However, indexes rarely collapse without warning because they aggregate the company risk of all index constituents. Even the growth of Exchange Traded Fund activity has not altered this fundamental relationship.
For those who do not understand charting it may appear that an index, and by extension a market, can collapse quickly. There are very rapid market collapses, as in 2008, but these are generally preceded by clear chart signals with broad-based index chart patterns.
The Dow and S&P 500's collapses in early 2008 were preceded by early warning chart pattern behavior. Our CNBC column notes and commentary on Squawk Box Asia in late 2007 and early 2008 identified these patterns and set, what were at the time, almost unbelievably low downside targets.