S&P Downside Targets

I received a few emails from readers wanting to know how low the S&P can go. First of all forecasting the direction of the market is hard enough, now you want downside targets? OK...I'll give it a shot.

Above is a 10 year monthly chart of the S&P500. Overlayed on the chart are the 15 and 20 month moving averages. Notice how the market tends to gravitate back towards these moving averages. Based on the above chart if the market does continue to pullback here, I would say the S&P will most likely test those levels. As of now the averages are at 1310 and 1336. Keep in mind these averages are rising so next month they will be at higher levels, but as of now that's where I think the market is headed.