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Intermediate-Term Oversold Market

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PostPosted: Sat Aug 11, 2007 3:26 am    Post subject: Intermediate-Term Oversold Market Reply with quote

On Friday, SPX successfully tested Monday's low slightly below 1,430 and closed above 1,450. Over a year ago, the stock market was in the second longest bull market without at least a 9% correction. SPX 1,415 is a 9% fall from last months high and 1,400 is a 10% fall. Consequently, SPX may fall lower sometime in the seasonally weak period through October. However, next week is an options expiration week, which are typically volatile and bullish.

Below is a three-year chart of the NYMO 50-day MA (blue line and right scale), the NYMO 200-day MA (red line), and the daily NYSI (black line and left scale). These intermediate-term indicators suggest SPX will be higher in the months ahead, e.g. a test of the July high. The second chart is the CBOE Put/Call (CPC) 10 and 200-day MAs (blue & red lines and right scale). The CPC 200-day MA is at an all-time high, which is also market bullish. The third chart shows the daily SPX.

Technical indicators and seasonal factors suggest SPX will be in a volatile range, e.g. between 1,400 and 1,500, at least through August, and then rise into the end of the year, to at least 1,550. However, it's important to note, the stock market has been in a structural (long-term) bear market, since 2000. So, SPX may not rise much above its 2000 (intraday) high at 1,553 and a larger correction (up to 50%) will take place sometime in the years ahead.

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