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It's All in the Chart ! - July 7th, 2010

|Includes: SPDR S&P 500 Trust ETF (SPY), SPY

Ok we go again on the roller coaster ride of the US equity market. I can't ever seem to recall a time when there was such a diversity of opinion about which direction the economy and the capital markets are headed.

We have some noted Ivy League economists saying we are headed for a depression. We have others trained in the same institutions saying we are well on the road to a solid recovery.

We have some noted equity market strategists telling us that we are headed for new highs in 12 to 24 months,  while others just as noteworthy are telling us we will make new lows over the next few years.

We have the well regarded "Bond King" Bill Gross telling us in early May we should be dumping our US Treasury holdings as rates are about to skyrocket past 4 %. Just a scant 60 days later and he is apparently adding to his Treasury holdings, presumably to replace the ones he dumped in May ?

When there is such a confused state of fundamental opinion, I simply offer an elegant approach. It's all in the chart. I know some here eschew chart reading as some sort of voodoo, but I am of the opinion that along with fundamental analysis, it should be a part of everyone's investing toolkit.

So without further adieu, here is the latest read on the equity market as measured by the SP-500 index as of the close on July, 7th, 2010:

We are going to use a simple regression trend analysis to try and find support and resistance points for the market. We are obviously still in a downtrend that started in late April and after being rejected at 1123 (look at the trend channels) we have bounced around and seem to be headed for a test of 1083 which is the next "high point" in the channel. If that fails, which I believe it will, we will look for a bounce opportunity at around 950. So far these trend channels have allowed me and my clients to stay a few steps ahead of the market and I am hoping they will help you do the same.

I encourage questions and any constructive comments about my approach which has worked in good times and bad. Here is the chart:

Disclosure: Disclosure: No Positions