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Strategies & Market Trends : Ask DrBob

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From: freeky	10/9/2008 11:13:13 PM
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Comments from John Murphy - same target as the last article stockcharts.com stockcharts.com NEXT MAJOR SUPPORT ... One of our readers suggested that we get back to basics and simply point out where the next major support levels are located. To do that we have to rely on monthly price charts. In a major bear market, the best way to look for potential support levels is to look for previous lows that were hit during the last bull market. The monthly bars in Charts 1 and 2 show, however, that all of those prior reaction lows have been broken. Another potential support level occurs in the 62-66% retracement level of the previous advance. Both the Dow and the S&P 500, however, have lost more than 70% of their previous bull market gains. That makes the next major support level the lows that were formed in late 2002-early 2003. That doesn't mean that we have to get there in a straight line. There's always the possibility of a fourth quarter rebound. But it now looks like the 2002-2003 lows will be revisited sooner or later.

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