From the September 01, 2010 issue of Futures Magazine • Subscribe!

S&P 500: Split decision

The S&P 500 inched up throughout July before dropping a bit in mid-August and analysts are split on where it’s headed next.

“The S&P 500 is in a range-bound trade. We’ve seen a breakdown below the 200-day moving average and below 1,100, so we’re going to be going down to test 1,040. That’s where we will be in mid-September,” says Spencer Patton, chief investment officer, Steel Vine Investments. He says lower GDP should weigh on the S&P for the short-term. “We’ve seen the June deficit explode to $50 billion in the U.S. and wholesale inventories are rising much less than expected, [and both are] key assumptions in the calculation of GDP. Rather than slow growth, we may be getting closer to no growth.”

Alan Bush, senior financial futures analyst at Archer Financial services, disagrees, saying that the expanding U.S. trade deficit is actually good news for the S&P. “[It’s] a bullish indication because it means the larger the deficit, the more demand consumers have in the U.S. for consumer goods,” he says. He says low interest rates will take the market higher through the end of the year and expects the S&P to surpass its August highs and get above 1,127 by mid-September.

Paul Brittain, branch manager at Whitehall Investment Management Las Vegas, thinks the S&P is likely headed lower and will be around 1,000 by mid-September and dip below 1,000 by mid-October. “We should start our next bull market sometime in the next year. It might be starting now, but we won’t know until those formations are made,” he says.

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