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Big picture perspective on the S&P500 & ASX200

February 6, 2017
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The five-year weekly chart below shows that the S&P500 is trending up in a secular bull market demarcated by the bold red rising channel lines. Secular – meaning a long-term cycle – bull and bear markets typically last around 16 to 18 years. However, the last secular bear market from 2000 to 2013 lasted just over 13 years.

Technically, the current secular bull market started in April 2013, shown where the S&P500 crossed above the horizontal black line. Meaning that the S&P500 is nearly 4 years into this secular bull market and up 45% since the April 2013 breakout to a then new all-time high. To put this into perspective, the two prior secular bull markets from 1950 to 1968 and from 1982 to 2000 were up 450% and over 1200% from their respective breakouts.

No market rises or falls in a straight line which means that declines and sideways movements occur, sometimes for many months and even years, even though the secular trend remains intact. A primary bear market occurred, during this current secular bull market, from April 2015 to July 2016, shown by the two declining black channel lines. The first indication of a return to a primary bull market within the secular bull occurred when the S&P500 rose above the upper black channel line. The second was when the S&P500 rose above the uppermost resistance zone is shown by the top bold blue rectangle. Since then the S&P500 has continued its advance, declining once to test support at the zone just mentioned.

Technically, this secular (primary) bull market should continue to rise towards the upper red channel line, making new all-time highs along the way. It won’t get there in a straight line and when it does it won’t necessarily decline immediately; it could bounce along the upper channel line for a few months, or even break through it.

At some stage, there will be resistance. When that comes expect a decline or sideways movement for many months or even longer than a year or even two, potentially meeting the lower channel line as occurred in February 2016. Expect the doomsayers to shout aloud about the sky falling on our heads, not only when the retracement occurs, but all along the way up to the upper channel line.


Source: Beyond Charts

The five-year weekly chart below shows that the ASX200 has just emerged from a primary bear market, which is shown by the down-trending black channel lines. The switch to a primary bull market occurred when the ASX200 crossed above the upper black channel line. Note that the period depicted for the ASX200 is exactly the same as the S&P500 above.

The ASX200 is yet to rise above its recent high of 5996, achieved in April 2015. This high is its first target now that the ASX200 has technically reverted to a primary bull market. Resistance is to be expected at the zone marked by the uppermost blue rectangle, as is a potential decline to test the upper black channel line.

Should the ASX200 not remain above the said support zone then expect a pullback to the middle support zone. This would be bearish as it would take the ASX200 back into the primary bull market between the two black channel lines. However, the technical odds are that the ASX200 will advance to test that recent high of 5996.


Source: Beyond Charts

Gary Stone is the CEO of Share Wealth Systems and author of Blueprint to Wealth: Financial Freedom in 15 Minutes a Week

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