The stock market often tends to close the week in the middle of a short-term trading range. SPX closed last week at about 1,259 1/2. Short-term support is at 1,246 (previous four-year high) and short-term resistance is at 1,273 (recent 4 1/2 year high). The trading range may continue next week, which is options expiration week. Normally, options expiration weeks are volatile, and there are many events next week that will contribute to volatility. OPEC meets on Monday, the FOMC announcement is Tuesday, there are many important economic reports throughout the week (listed below), data on the holiday sales season will be reported, and oil prices will continue to influence the market. The two charts below are SPX and OIH (oil ETF) daily charts. The central tendency of SPX next week may be 1,260. So, if SPX falls to the low 1,250s, that may be an opportunity to buy calls, and if it rises to the high 1,260s, that may be an opportunity to buy puts. OIH is relatively overvalued (compared to SPX and oil prices), because it has been rising into the OPEC meeting. However, OIH may pullback to around 125 sometime next week, and puts may be a buy. Next week's monthly or quarterly economic reports are: Monday-Treasury Budget, Tuesday-Retail Sales, and Business Inventories, Wednesday-Trade Balance, Export Prices, and Import Prices, Thursday-CPI, Empire State Index, Industrial Production, Capacity Utilization, and Philadelphia Fed, and Friday-the Current Account. The weekly retail sales report is Tuesday, the weekly oil inventory report is Wednesday, and the weekly unemployment claims report is Thursday. The Nasdaq 100 was rebalanced after the close Friday (12 stocks were replaced), which may contribute to volatility Monday. The OEX Dec Max Pain point remains at 575 (with the value of calls far greater than puts) and QQQQ Dec Max Pain remains at 41 (with the value of puts far more than calls). OEX closed at about 574 3/4 and QQQQ closed at about 41 3/4 Friday. The second half of December is normally bullish. However, there are concerns about the "consumption bubble," created by strong housing demand over the past few years (consumption represents two-thirds of GDP). Charts available at www.PeakTrader.com Forum Index Market Overview section. |
