Intermediate-term technical indicators suggest SPX will be much lower within six weeks. The chart below is an SPX daily chart, with indicators, since the end of the rally in Nov. The chart shows the NYSE Oscillator's (i.e. NYMO) 50-day MA peaked two months ago slightly above 25 and closed at 2.12 Fri. Normally, when the Oscillator's 50-day MA rises to 25, it will fall to negative 25. Also, the second half of the downtrend tends to be steeper than the first half. Moreover, the chart shows, the VIX 200-day MA fell last week to 12.38. VIX closed at 11.85 Fri and has been below the 200-day MA over most of the past month. Consequently, the VIX 200-day MA may fall to the historically low 12.29 level reached in mid-Feb '94, when SPX pulled-back 9.7% in 60 calendar days from early-Feb to late-Mar '94. So, there may be little SPX upside, and at least a moderate pullback may take place over the next few weeks. Last week, the technical short-term oversold condition of the market was neutralized. The Oscillator and Stochastics reached low levels early last week and then rose with the market late in the week. However, SPX may continue to rise to just below the Parabolic SAR (i.e. purple dots), similar to the rise in late Jan, before pulling back sharply, although the 10-day MA was resistance Fri. SPX generally traded around its Mar Max Pain point at 1,275 most of last week. There are many important economic reports next week: Mon--None, Tue--Retail Sales, Current Account, Business Inventories, Wed--Import & Export Prices, Empire State Index, Oil Inventories, Fed's Beige Book, Thu--CPI, Building Permits, Housing Starts, Unemployment Claims, and Fri--Industrial Production, Capacity Utilization, Michigan Consumer Sentiment. Also, next week is an end-of-the-quarter options expiration week. Consequently, it may be a volatile week. SPX has been in a slow and volatile uptrend, over the past 3 1/2 months, after the rally ended in Nov, which is a bearish pattern, e.g. a rising wedge (within another two year rising wedge) or a double top (or potential triple top). Uncertainty about monetary policy may heighten, although the FOMC is expected to raise the Fed Funds Rate 25 basis points Mar 28th, because of stagflation concerns, i.e. slowing growth with rising inflation. Charts available at PeakTrader.com Forum Index Market Forecast section. |
