SPX Multi-Year Support & Resistance Levels

In 2 1/2 days last week, SPX declined from 1230 to 1182 breaking a number of key short-term support levels. Energy and utility stocks, which together 15% of the SPX plummeted. OIH (oil ETF), for example, fell 124-110 on the 2 1/2 days of sales. Many institutions held positions in heavy oil for the end-of-the-quarter window dressing, and then quickly began heavily sold. After the new quarter

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

There is no statistically significant correlation between the oil (and oil) and non-oil stocks (and stock market), because sometimes the economy will both oil and non-oil drive in the same direction, and at other times oil prices, oil and non- oil stocks driving in the opposite direction. Last quarter, the price of oil and oil stocks rose, many non-oil stocks fell, and the stock was flat overall. And real economic growth, which has slowed, stabilizes at 2 1/2% to 3% over the next two quarters, should benefit many non-oil short term.

The graph below is an SPX monthly chart, since 1998. SPX has strong (long) resistance around 1250, ie 61.8% Fibonacci level, and monthly upper Bollinger Band. Strong support is around 1165, ie mid Bollinger Bands, Parabolic SAR buy signal (blue dots), 50% Fibonacci level, and extended the Price-by-Volume bar (on the left side of the graph). If SPX closes below 1160, then I would expect a correction of 10% below 1125 (the four-year high) in any case. SPX can easily stand retest in 1250. However, it is more likely to solidify above SPX 1165 to grind higher to 1250 (more specific information has been paid in the other five categories of the section).

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

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