ChartWatch: S&P 500 & ASX 200 2024 targets and beyond

Around this time of the year, it’s common for the big brokers and research houses to issue or amend their end-of-year targets for the following year. This article suggests the S&P 500 index could be trading somewhere between 4,400 and 5,400 by the end of next year.

There’s very little chance any of these brokers are using technical analysis to arrive at their targets. Given TA’s my gig, I thought I’d take a stab at some technical targets for 2024 for US and Aussie markets, and perhaps even, beyond!

Measure that move!

A "measured move" is a technical analysis technique used to calculate potential targets. In a measured move, you're looking to measure the magnitude of a previous move between two major market turning points, and then project this move from the most recent turning point.

For example, on the S&P 500, if we consider the move between the COVID-19 low in March 2020 of 2,191 and the bull market high in January 2022 of 4,809, this is a move of 2,627 points or 120%. The most logical point to project from is the October 2022 bear market low of 3,491. In points, this gives us a possible target for the current S&P 500 bull market of 6,118 (in points) or 7,676 (in percent).

There are two relevant measured moves at play for the S&P 500

This is really big-picture stuff, and measured moves are not meant to be accurate predictors of price, rather, just a rough guide! A move as big as the S&P 500 measured move could easily take a couple of years (like the last move), or more.

If I'm considering where the S&P 500 might be by the end of 2024, there's a smaller move which I think is relevant. Take the move between the October 2022 low of 3,491 and the July high of 4,608. That was 1,115 points or 32%. Projecting from the recent October 2023 low of 4,103, this gives us a medium-term target of 5,216 (in points) or 5,415 (in percent).

The trends on the S&P 500 look good here – both in the medium term (light green ribbon) and long term (dark green ribbon). The candles from the October low tell me there's been a major shift in the demand-supply environment towards the demand taking control. I can't see any reason from a technical viewpoint why we can't think seriously about some of these measured move targets.

C’mon Aussie, no really, c’mon…

Bringing it back home, let’s try and decipher some medium- and long-term targets for the S&P/ASX 200 (XJO). 

The first thing you’ll probably notice is the medium- and long-term trends on the XJO don’t look anywhere near as good as they do for the S&P 500. For starters, instead of a medium uptrend, our market is showing a medium-term downtrend (light pink ribbon). The long-term trend isn’t as good here as it is in the States, either. We’re talking neutral (orange ribbon) versus up. 

Recent candles aren’t as big and white, and the price action is still lower peaks and lower troughs. Put all of these technical indicators together, and I can only conclude the demand-supply environment for Aussie shares is more balanced. Equilibrium between demand and supply usually leads to choppy, sideways trading. I’m sure as an avid watcher of the local bourse yourself, you can relate to this analysis!

Let’s assume for one second we get our act together. After all, if the S&P 500 is going to hit 6,118, then surely the Aussie market will be dragged higher kicking and screaming!? Let’s do the measured moves.

We can dream! The measured moves at play for the S&P/ASX 200 (XJO)

Considering the move between the COVID-19 low in March 2020 of 4,402 and the bull market high in August 2021 of 7,633, this is a move of 3,230 points or 73% (compared to the S&P 500’s 120% move!). The most logical point to project from is the June 2022 bear market low of 6,407. In points, this gives us a possible target for a potential XJO bull market of 9,637 in points or 11,109 in percent.

As for medium-term targets, i.e., where the XJO might be by the end of 2024, let’s use the smaller measured move between the June 2022 low of 6,407 and the February high of 7,568. That was 1,161 points or 18% (again lagging the S&P 500). Projecting from the recent October 2023 low of 6,751, this gives us a medium-term target of 7,912 (in points) or 7,974 (in percent). In either case, we can only dream!

The trend, not a measured move, is your friend

Now you know how to calculate measured moves, I expect you’ll be off doing them for all of the charts in your portfolio! And I have no issue with this. My experience suggests, measured moves are in the order of magnitude of “somewhat reliable”.

Often they occur because many people know about them and are looking to get out at the measured move price. They become self-fulfilling prophecies.

But! I recommend you always defer to the trend. There’s no point measuring a move to infinity on that tiny mining stock which is down 90% from its high! Measured moves are just another tool in your technical analysis toolbox to complement your trend-following methodology.