One interesting price level to look at when coming off of market bottoms is whether or not a new bear market (20% decline) would take the index back to new lows. Up until recently, a 20% decline would have meant a lower overall low, but if the market were to top out now, a new bear wouldn't mean the March lows would be violated. This acts as an additional level of support. As shown below, if a new bear market started following yesterday's high, the -20% threshold would only take the S&P 500 down to 725.79, which gives investors 50 points to work with before the index reaches the March low of 675.
If.
Posted by: J.Livermore | May 05, 2009 at 03:55 PM