Investing Knowledge

LONDON (ShareCast) - US Stock markets continue to defy the pessimists as they struggle to break lower. The continued lack of downside follow-through continues to give the bears pause for thought.

The key lies in the S&P500 which is currently trading between key support at 878 and the June highs around 950. It is currently giving the appearance of a possible head and shoulders formation; however the right shoulder is in the process of forming. A close above 950 would negate the above scenario and give further comfort to all the bulls out in the market.

With US earning season upon us the market should soon find out the direction of the next stage of this particular stock market move.

The key resistance area on the S&P is at the June highs around 950, of which a close above would reinforce upside potential.

The key support area for the S&P500 can be found between 890 and 877, a break of which could potentially target the 826 support area.

The Dow Jones is almost secondary to this scenario because it is pretty much trading in line with the S&P, so whatever happens on the S&P over the coming weeks will also determine the direction of the Dow. On the Dow there is significant support around the 8,220 support zone with resistance around 8,600 and behind that at 8,890.

As far as future direction for stock markets is concerned it's very much a question of watch this space.

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Also read my Investors Guide to Technical Analysis and Level 2