S&P 500 nears long-term target

Price at time of writing – 1761.

With the Dow Jones Industrials closing in on my target level of 16,175 (currently 15,615, at last Friday's close), today I look to reaffirm the correlation between it and my target on the broader S&P 500 index.

To refresh our memories, in my last update on the S&P 500 on 23 September I reiterated a buy or 'stay long' policy with a target price of 1791. This recommendation remains intact. 

I also noted that the index had already outperformed the Dow since their unique lows formed in March 2009. Whereas we are currently waiting for the Dow to complete a 150% rise from that low – and fulfil my target level at 16,175 – the S&P arrived at this milestone in May this year. Gann-theory bulls might now argue there is every chance the index will push on to fulfil the next target in this 'quarters' sequence, completing a 200% rise. If this were to occur, it would please those that like round numbers, taking the index to a precise reading of 2000. 

I am more cautious, however. A further 30-point rise to 1791 would complete a 66.66% move from the secondary (but still important) low that formed in October 2011. This requires an advance of just 1.7%. Although the Dow requires a slightly larger 3.6% rise to fulfil my target, this remains an excellent correlation, and well within the acceptable margin for error.

Whichever way I cut and dice it, US stock markets are near to fulfilling my long-term targets, and appear set to confront a period of resistance. 

Recommendation: stay long. Prepare to take profit at 1791.

S&P 500 chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.