SPX is between strong resistance levels at around 1,250 and strong support levels at around 1,165 (see recent "SPX Multi-Year Support & Resistance Levels" article). It seems, SPX has hit a short-term low at 1,168, and will trade in a volatile range over the next few weeks. Also, it seems, rotation from bonds and oil stocks into non-oil stocks will take place, over the fourth quarter, since many non-oil stocks are relatively or fundamentally undervalued. Also, slowing growth in the housing market may cause a shift of investment into the stock market.

The first chart is a NYSE Oscillator daily chart, since mid-2002. SPX and the Oscillator generally move together. Each time the Oscillators's 20 day MA (blue line) fell to near negative 50, both the Oscillator and SPX rose (also shown in older charts). Currently, the 20 day MA is negative 37, after a four-month downtrend. An SPX 10% correction, to below 1,125, is possible. However, the Oscillator suggests it's more likely SPX will trade in a range, perhaps for several weeks, and then rally.

The second chart is an SPX daily year-to-date chart. Short-term resistance is around 1,192 (an old level) and 1,200 (200 day MA, which is flattening for the first time since the cyclical bull market began, in Oct 2002 or Mar 2003). Short-term support is around 1,180 (previous week's low, middle of one hour Bollinger Band, and lower range of a previous consolidation area, between 1,180 and 1,190). SPX often closes the week in the middle of a perceived short-term trading range. SPX closed at 1,186 (which fits well with my 1,170 to 1,200 range stated over a week ago). However, perhaps, SPX will not pullback below the high 1,170s early next week before rising higher, perhaps to 1,192 sometime next week.

The bulk of third quarter earnings, and fourth quarter guidance, will take place over the next two weeks. Also, next week is options expiration week, which is typically a volatile week. Moreover, economic reports, along with oil prices, will continue to move the market. Consequently, there will be excellent trading opportunities, particularly next week, to make huge gains quickly. Furthermore, there are many undervalued longer-term buys (see pay sections for more detailed information).

Charts available at PeakTrader.com Forum Index Market Overview section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

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