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Charting the markets: the S&P 500

I've been catching up with some recent market outlook reports from some of my favorite traders/writers and market-watchers.

For those who are actively trading (or watching) this market, one of the big topics being tossed about recently is the future direction of the S&P 500. Today we'll take a quick look at some recent market commentary on the US benchmark share index, as well as some other major market indices.

Before we jump into the S&P 500 charts, let's get a quick view of the markets and the economy as a whole. Here's what Frank Barbera had to say in his July 7 market-wrap for FSO:

"At this time it appears that going forward, instead of the data simply not getting any worse, the markets will increasingly demand to see tangible improvement,
proof that things are in fact getting better. As it happens, to date there is virtually no evidence that a material change for the better is underway. As a result, markets have entered correction mode which was predictable given the huge overshoot on the upside seen in recent weeks.

In my view, the odds are high that on the corporate front, the rally of the last few months has been about “hope” for improved results, and has been largely predicated on huge cost cutting steps implemented throughout the corporate world. In the weeks ahead we may see a market that softens further as it becomes clear the tangible proof the markets want to see in both earnings and economic figures is not immediately at hand."

Frank goes on to add that this current recession is not a cyclical affair, but is "most likely a structural contraction". This carries wider implications for the strength of consumer spending, corporate revenues, and resulting stock market valuations (P/E multiples). Read on for more of Frank's overview.

Also at FSO, Carl Swenlin had recently (July 10th) pointed to a technical break of the S&P 500's neckline support, saying that a resulting decline down to 810 was likely. However, Swenlin also noted that the neckline violation could mark "the end of a correction and a bear trap", though he did not find this scenario likely.

Chris Puplava follows up this discussion of the S&P pattern in a July 15 wrap-up entitled, "A Bipolar Market". As you can see from the charts included in Puplava's article, the S&P 500 made a quick recovery move to the upside after briefly breaking the neckline support.

Which brings us to the vital question:

"The question now is which will be the final outcome, a break above resistance or a break below support?"

Brian Shannon at AlphaTrends has also been keeping a keen eye on the S&P 500 in recent days. Yesterday, Brian shared some charts of the S&P 500 and thoughts on a possible (bullish) inverted head & shoulders pattern on the weekly chart. He cautioned that we'd still have to see more positive movement on the daily charts to take this pattern seriously.

For those who'd like to hear more about Brian's technical view of the market, check out this very recent (7/15/09) stock market analysis video on Youtube.

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