Where's the S&P 500 headed?

I thought I would reward those frequent visitors with a second post this weekend. Today's chart is of the S&P 500 and I have drawn some lines on this 1 year chart, as to where I believe the S&P has resistance and will be difficult to overcome. First the chart and then the commentary.

I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other.

I do not see a rosy outlook in the markets unless the government would rather continue to prop them up. The day of reckoning will eventually come, both here and in Europe and when it does, it will infect the rest of the world. Much of the media's attention has been on China lately as well. This economic crisis and debt crisis, which has caused a slowdown in Europe and the US, is already affecting China. I am watching India, as I see India as the canary in the coal mine. Here are some headlines from India as of this morning to emphasize my point about India:

- States must reduce fiscal deficit since debt position has become difficult in many states: Montek
- PM wonders if 9% growth feasible. The government now expects growth of close to 8 percent this fiscal year.
- India can achieve 8-8.5 pc growth despite global crisis: PM Manmohan Singh says India can 'swim against the wind blowing from abroad'.
- Food inflation back in double digits. Inflation rises sharply to 10.6 pct for week ended Oct 8 from 9.32 pct.
- Mineral output down 5.99% in Aug. India's production of minerals was valued at Rs 13,378 crore, the government said today.
- Consumer Price Index jumps 1.2% in Sep. Expensive food, clothing and fuel pushed up the CPI by 1.25 per cent in September.

So keep your eyes and ears tuned into what is happening in India. Here's the latest piece of news about the Stock market:

Mumbai: Taking positive cues from the US markets, Indian bourses may open with gains but the mood is likely to stay cautious as the RBI meets on Tuesday to take stock of inflation and European leaders moot a solution to the eurozone debt crisis, say analysts.
The BSE benchmark Sensex last week shed 1.73 per cent on high inflation and mixed global cues with downward bias.

"Stock market will trade taking cues from day-to-day basis as this week is going to be an eventful one.

If you too would like to follow the news in India click here to India's Financial Express.