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SPX closed the week at about 1,284, while oil closed at $67.76 a barrel. Two potential market catalysts next week are the FOMC and OPEC meetings, both on Tuesday. The FOMC is expected to raise the Fed Funds Rate 25 basis points, while OPEC is anticipated to leave oil output unchanged. However, it seems, the stock market partially discounted a FOMC tightening pause, since it rose on the report of much slower real GDP growth.

The charts below are same period weekly charts of SPX, the NYSE Oscillator, and OIH (oil ETF). SPX major resistance levels are 1,288 (to close the gap), 1,295 (recent high), and 1,307 (upper line of Bollinger Band). Major support levels are 1,246 (a prior high and the late December low), 1,242 (middle of the Bollinger Band, which is also the 20-week MA), 1,200 (lower line of the rising wedge), and 1,176 (lower line of Bollinger Band). The 50-day MA, currently at 1,265, was short-term support.

The NYSE Oscillator's 10-week MA (blue line) indicates SPX will be much lower within three months. The Oscillator's 10-week MA rose above 25 in early January and fell below 21 last week. Typically, when the Oscillator's 10-week MA reaches 25 and starts to fall, SPX selling begins slowly and accelerates. Also, the daily Oscillator will fall near negative 50, at least once, and SPX will fall sharply. So far, over the recent decline, the daily Oscillator hasn't fallen near negative 50.

OIH had almost a parabolic rise in January on rising oil prices, into the OPEC meeting, on top of big gains last year. Energy stocks represent about 15% of SPX. OIH has a stronger positive correlation with SPX than with oil prices. Currently, OIH is above the weekly upper Bollinger Band line. Oil prices may fall somewhat within a week or two after the OPEC meeting, and OIH may fall greater than SPX.

Economic growth has slowed, while inflation has accelerated. However, output is expected to pick-up in the current quarter, while inflation expectations have risen. Consequently, there may be greater uncertainty about monetary policy between the FOMC January and March meetings, which may be the catalyst for a steep fall in the stock market. Also, a slowing housing market (which slows consumption), rising production costs (including higher cost of capital), and lower productivity (from greater employment) will create uncertainties about corporate profit growth.