Very Scary S&P 500 Chart

While the SPY has yet to reach its 2002 lows of $71.20, the S&P 500 has now breached those lows.

We try not to make too much of technical analysis when applied to such large time frames since it seems rather dubious that such long term charts expanded to multi year monthly levels can accurately portray institutional positioning for future events. This is because the future is dynamic and investors will be reacting to unknown events in the future.

Let us try and put this in more simple language. Technical analysis lets us peak into the inner workings of the market and lets us know if there is current accumulation or current distribution. Current accumulation and distribution typically is a response to the outlook in the near term, whether it be last week's earnings or next quarter's projections.

But no one has a crystal ball that can tell us what is going to happen a year from now and every day the market reassesses the current outlook based on what the Fed does with interest rates, what the companies are projecting in future earnings, whether the government will bail out GM, etc...

Nevertheless, technically the S&P is in worse shape now than it was in 2002 when it struck bottom last. Technically, there is no real support before S&P 500 $450 and that's a scary prospect. Let's hope the outlook starts to change and change quick.