SPX MultiYear Support  Resistance LevelsSPX MultiYear Support Resistance Levels

In 2 1/2 days last week, SPX fell from 1,230 to 1,182 breaking several major short-term support levels. Energy and utility stocks, which make up 15% of SPX, fell sharply. OIH (oil ETF), for example, fell from 124 to 110 over the 2 1/2 days of selling. Many institutions held heavy positions in oil stocks for end-of-the-quarter window dressing, and then sold heavily soon after the new quarter started.

A barrel of oil fell less than oil stocks. Oil fell from roughly $66 to $61 over the 2 1/2 day sell-off, and closed at about $62 Friday. Oil has held $60 for two months. However, it seems inevitable that oil will fall further within the next few weeks, perhaps to the low $50s, because of seasonal and cyclical factors. Consequently, there may be rotation from oil stocks into non-oil stocks over the fourth quarter. Many non-oil stocks were severely beaten down by persistently high oil prices, particularly when oil held $60. If earnings growth decelerates slowly, many non-oil stocks are cheap enough to rise sharply.

There's not a statistically significant correlation between oil stocks (and oil prices) and non-oil stocks (and the stock market), because sometimes the economy will drive both oil and non-oil stocks in the same direction, and at other times oil prices will drive oil and non-oil stocks in opposite directions. Last quarter, oil prices and oil stocks rose, many non-oil stocks fell, and the stock market was generally flat. If real economic growth, which has slowed, stabilizes at 2 1/2% to 3% over the next two quarters, then many non-oil stocks should benefit short-term.

The chart below is an SPX monthly chart, since 1998. SPX has strong (multi-year) resistance at around 1,250, i.e. the 61.8% Fibonacci level, and monthly upper Bollinger Band. Strong support is around 1,165, i.e. middle of Bollinger Band, Parabolic SAR buy signal (blue dots), 50% Fibonacci level, and extended Price-by-Volume bar (on left side of chart). If SPX closes below 1,160, then I'd expect at least a 10% correction to below 1,125 (from the four-year high). SPX may then be in position to more easily retest 1,250. However, it's more likely SPX will consolidate above 1,165 before grinding higher to 1,250 (more specific information is in the other five categories of the pay section).

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

by Arthur Eckart
References and Bibliography

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.

Rated:NR/0 Votes
Add To My Article Reading List
Add To My Article Reading List
Print Article
More Article By Arthur Eckart
More Article by Arthur Eckart
More Articles From Investing
More Articles From Investing
Related Articles and Readings
Invest in Microcap Stocks for Highest Returns By: B Patrick Regan
Micro-cap Stocks are much maligned for being too volatile for the average investor. But, as experienced investors know, highly volatile investments can yield the best investment returns. A quick look at the best-performing stocks of 2005 proves this fact.The Best Stocks of 2005 Were All Micro-capsOf the 25 stocks that ...
Nothing Scary About Penny Stocks By: Shane Sokol
Over the last few decades, smaller stocks called ?penny stocks? have slowly gained a bad reputation. While there are hundreds of fly-by-night companies and shell companies that many unscrupulous business people have used to make money off of the uninitiated, there are thousands of great, small companies that qualify under ...
Dont Overlook Three Symbol Stocks By: Floyd Snyder
One of the things a new trader learns within a few weeks or so of beginning his new adventure into the world of day trading is the difference between three symbol stocks and four symbol stocks.The first thing to be learned, with a few exceptions, is that three symbol stocks ...
Learning the Stock Market GameHow to Day Trade Stocks OnlineLearn to Trade Stocks By: Tom E Levington
These days there can be a lot of ways to make extra money. Buying and selling real estate, getting a second job or opening up a brick and mortar business operation are among the most popular options.But many of those traditional business options might require a heavy upfront investment or ...
Realistic Ways to Buy Stocks Cheap and Sell Stocks High By: Quentin James
If anyone ever comes up with the perfect time to buy and sell stocks, that person will own the world. Right now, timing-based stock trading is based on premises only slighly better than magic. There are, however, some good rules of thumb that you can follow which will help you ...
The information provided in this article and/or the comments is the sole responsibility of their respective authors and does not necessarily reflect the opinion of ezinepost.com. ezinepost.com  does not endorse any article and/or comments published by our web users unless otherwise noted. 

Member Panel

login to submit articles and more


  • » Active Categories: 419
  • » Active Articles:252096
  • » Active Authors:32163
  • » Active Members: 35787
  • » Statistics Updated:
    - Sat Aug 11th, 2018 01:04PM EST