As a result of the proposed $700 billion US government bailout, the S&P 500 has generally rallied over the past week (up 4.5%). However, the S&P 500 still trades down over 22% from its October 2007 highs. For some perspective on the latest stock market action, today’s chart presents the current trend of the S&P 500.

For all the volatility of the past year, the S&P 500 has traded within the confines of a downward sloping trend channel. As today’s chart illustrates, the proposed government bailout came just in time to help the S&P 500 trade up from support (green line) — though the longer-term trend remains in effect until proven otherwise.

Not that I recomend trading G-Line forecasts intraday but I though I’d share with you todays market action with the forecasted line -

Pictures are worth a thousand words -

Here is an alert from today -

** ALERT  **  Time= 1040: The current price action
is bearish. Short positions taken on upside rallies
may be beneficial between now and the close.

In an attempt to put the current financial crisis into perspective, today’s chart illustrates the 10 largest Chapter 11 bankruptcies in US history. As the chart illustrates, the bankruptcy of Lehman Brothers earlier this week dwarfs all previous US bankruptcies. The US government has taken the approach that some companies are ‘too big to fail’ as failure could have devastating systemic effects. In the case of Lehman Brothers, however, the bar as to what is too big has been raised - considerably.