Potential SPX Overshoot

By: Arthur Eckart
Submitted: 2007-01-17 16:16:37
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

The most recent article "Lower Volume Trading Range" showed SPX held the cyclical bull market low, intermediate-term technical indicators may have bottomed, and an SPX 1,246 to 1,290 range may take place in July. However, the possibility of a rise above 1,290 should be taken into account.

The two charts below show daily SPX (right scales and candlesticks) and daily NYSE Oscillator (NYMO; left scales and green lines) in 2004 and currently with SPX 50 and 200-day MAs. NYMO closed above 72 on Monday, which is the highest level since early-June 2004.

The first chart shows SPX topped in March 2004 at 1,163 and began a volatile downtrend. The second chart shows SPX topped in May 2006 at 1,326 and also began a downtrend. The gray arrow in the 2004 chart may indicate SPX movements over the next month. The first two weeks of July tend to be bullish. So, it's possible, SPX may rally into earnings season, stay high, and sell on the FOMC anouncement August 8th. A short-squeeze may be triggered above 1,290 with upside potential to around 1,310.

However, there are major differences between the 2004 and current charts. When the 2004 NYMO rose above 80, it began below negative 100 (both the high and low were historical extremes), while the current rise began slightly below negative 50. Also, SPX rose above the 50-day MA on the first bounce after the top in 2004. However, SPX failed to reach the 50-day MA on the first bounce after the top in 2006.

Over the 2004 downtrend, SPX made lower highs. So, 1,290 continues to be major resistance, and the 1,246 to 1,290 range may take place in July. Nonetheless, a sharp rise above 1,290 should be taken into account. Also, the charts indicate SPX will be much lower within three months, and SPX may bottom in October or sooner, perhaps below 1,200.

Free charts available at PeakTrader.com Forum Index Market Forecast category.

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.

Article source: Expert Articles

Most Recent Articles in Stocks Mutual Funds category

  • So You Really Want To Trade Online - By: Terry Detty
    This is a good overview for those of you who are thinking about testing the online trading waters.
  • How To Learn Short Selling With TIM - By: Terry Detty
    This interesting phenomenon that is called short selling is not something that every American believes that they should be doing.
  • Carbon Emission Trading, The Basics Explained - By: Dwayne Strocen
    The Kyoto Protocol of 1997 was signed by 38 signatory countries to address the issues of greenhouse gasses and resulting climate change issues. The following article will provide an understanding of trading greenhouse gas emissions.
  • Using Technical Analysis To Manage Risk And Maintain Top Quartile Performance - By: Dwayne Strocen
    To manage an effective risk management solution requires more than the calculation of VaR. Ultimately a successful risk management program requires the execution of an effective hedge. Technical analysis is a vital element of this strategy.
  • To Sell a Stock or Hold--When Is it Time? - By: Dr. Winton Felt
    Should you use the strategy of the long-term buy-and-hold investor or the short-term sell tactics of the trader in order to lock in small gains? Let us look at a few alternatives and possibly a strategy.
  • The Probability of a Stop Loss Being Triggered - By: Dr. Winton Felt
    Sometimes there are no obvious regions of price support that can be used as a reference for placing a stop loss. However, by using a volatility-based stop loss, you can set your stop so that it is statistically improbable that it will be triggered by a stock's normal fluctuation within a given holding period. This can give a stock enough "wiggle room" to continue its climb without a high risk of a premature sale because of a non-significant lurch of the stock.
  • Trading Veteran Reveals Must Have Hints and Tips on Trading that Every Trader Should Know - By: Philip Birchley
    Your trading system is a set of rules that you have built up that should be met before you enter a trade. The more ways that a trade is confirmed- the better and the more money you're likely to make.You might wait for a certain pattern to emerge on the charts that indicates that you should trade- so you might find a buy signal for example.
  • Should You Step into Foot Locker? - By: Dennis Biray
    With the NBA and other sport seasons flaring up this autumn, you may be wondering if now is the perfect opportunity to purchase shares of Foot Locker (FL), especially since they will be releasing earnings shortly (November 19, 2006). While such may be said as a good deduction, there are other, more profound reasons and answers to this question which, may, unfortunately, delay or even abort your decision to carry on your purchasing intentions. While all the economic and fundamental analysis may signal a strong run for this company, the technical analysis side of these indicators weighs much more heavily in a stock like Foot Locker.
  • 7 Stock Market Tips You Can't Live Without - By: Joseph Harris
    Every day there are a dozen new HOT stock market tips that guarantee your financial success. Every day there are hundreds if not thousands of people that jump on the bandwagon, and every day, each of those people are disappointed.When it comes to popular stock market tips, there is no golden ticket to striking it rich.
  • The Basics of Investing in Stocks and Shares - By: Joseph Kenny
    Stocks can be considered a tool for building wealth, as they are a part of almost every investment portfolio. They represent the ownership of a company and are bought in the form of shares. Shares refer to the stock of a particular company.