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[arthur]

SPX had a steep sell-off from about 1,230 to just over 1,180 over the past two weeks, with little volatility. Consequently, the market became oversold. However, it then became even more oversold. SPX around 1,185 is a major support zone (i.e. previous congestion area). Also, 1,163 is a multi-year (Fibonacci) support level, which is strong support. Major resistance is at 1,192 (previous resistance) and around 1,200 (20 day MA). There's also a gap to close at 1,198.

It seems, oil prices will determine market direction short-term. The market anticipated falling oil prices when SPX rallied to about 1,230. However, currently, falling oil prices are not anticipated. So, unless oil rises further, the market is in position to bounce. If oil stabilizes, e.g. between $50 and $57 a barrel, then SPX may trade between 1,185 and 1,200 next week (see SPX and Crude Oil year-to-date charts below).

The FOMC is expected to tighten again Tue. Also, economic reports next week are: Tue PPI, Wed CPI and Existing Home Sales, Thu Unemployment Claims, Durable Goods Orders, and New Home Sales. There are two notable earnings reports: ORCL and BGO both on Tue. There's been some fear about inflation. However, the PPI and CPI may remain benign, because there's still slack in the economy. Nonetheless, higher energy prices are a tax on consumption and erode corporate profit growth.

The stock market will also be influenced by end-of-the-quarter window dressing (where stronger stocks may rise and weaker stocks may fall), new money at beginning of quarter, and income tax season (deadline in Apr, although much of it may be priced-in). Also, first quarter earnings season starts in early Apr.