S&P 500: May Tumble To 1000 From Almost 1900
Rajesh Sharma | Aug 26, 2015 01:55AM ET
Prices have a tendency to revert back to their long term mean. Though stock market history is not that long enough to empirically test this phenomenon for bigger cycles (cycles lasting several years) but even if one goes by the shorter term price cycles, it has been an established fact that prices do revert back to their long term mean. A similar phenomenon is the falling back of prices to their trend line support.
In one previous article it was mentioned that Russian Index is near its 17 years long trendline support, will it hold - well it has broken that support now and if there is a monthly closing significantly below that line, it may have serious implications. It is a great example of showing that even such long term trends can come under threat.
In case of S&P 500, the scenario is totally different, it is way above its long term trend support line - support is near 1000, and current price is near 1900! Can S&P 500 fall by almost 50%? It has already done so in 2002 and 2008.
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