S&P-500 Index May Drop Soon

There are several negative fundamental factors that can cause stock market downtrend: GDP growth slowed to 2.4% in the second quarter compared with 3.7% in the first quarter; jobless rate is at high level (9.5%); individuals and companies save cash at near record levels; consumer spending shows no signs of picking up; state budget deficit poses an additional risk to the US economy.

Despite a weak current conditions of the US economy and pessimistic investors' expectations, the stock market would continue to move sideways above some supportive level. However, technically S&P-500 Index is ready to start a downtrend cycle. The probability may increase with approaching September-October traditional low performance season.

Additionally, there is a natural stock market fluctuation. The following chart represents S&P-500 forecast for September 2010 using cycle analysis. The calculation has been performed using SMAP-3 computer program:




A possible prediction is a cycle with minimum in September. However, as always - technical prediction may be different if something fundamental happens.

Nothing in this piece or blog should be construed as investment advice in any way. Always do your own research or/and consult a qualified investment advisor. It is wise to analyze data from multiple sources and draw your own conclusions based on the soundest principles. Be aware of the risks involved in stock investments