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[arthur]

SPX generally traded between 1,140 and 1,160 last week (and traded almost that entire range on Fri). However, the narrow range will not continue indefinitely, and the market will soon break one way or the other.

The first chart is a SPX daily chart, since Jul 2004, that shows a Parabolic SAR buy signal last Tue, and a fall below 1,138 will trigger a sell signal. The low 1,160s continues to be major resistance, and 1,100 to 1,140 is a major support area, where the bulk of the 2004 consolidation took place. There's outside major resistance at 1,182, the current 50 day MA, and outside major support at 1,125, where SPX consolidated for a few days after a big rise. Also, SPX still has an open gap at 1,198.

The second and third charts are weekly line charts of the NYSE Summation Index and SPX, since mid-1998. Summations are similar to Oscillators, except they're longer-term indicators. The two charts show when the Summation's weekly RSI fell below 30, SPX soon either had a powerful rally or a bounce, shown in late '98 '99 '00 and '01, mid '02, and early-to-mid '04. So, based on just a few recent observations (although, not scientific), the Summation Index is indicating that SPX will be at least 40 points higher sometime within a month.

Economic reports next week include: Mon ISM Index and Construction Spending, Tue Factory Orders, Auto Sales, and the FOMC announcement, Wed ISM Services, Thu Productivity and Unemployment Claims, Fri Nonfarm Payrolls, Hourly Earnings, and the Unemployment Rate. Factory Orders is a leading economic indicator. High Productivity means lower inflation. Rising Nonfarm Payrolls could eventually generate a Multiplier Effect.

The catalyst for a rally, or a bounce, may be the realization that U.S. firms have more pricing power, because rising import prices allow domestic firms to raise prices. Also, the belief that the U.S. economy will continue to expand at above trend growth, although at a slower rate. Moreover, slower growth will lower oil prices. Furthermore, the market is down sharply this year, e.g. Nasdaq, which fell from about 2,200 in Jan to below 1,900 last Fri, in four months. If the Fed continues to tighten at a "measured" pace, then recession is unlikely this year, although inflation will likely be higher. However, longer-term, the U.S. seems to be heading into stagflation.

Some notable earnings next week are:

Mon (after the close): OSIP FMC PZZA.

Tue: MMC TEVA TYC MET VRTS Q CEPH NGEN SWC PER SWY.

Wed: QLGC INCY HL TWX CI CPHD SYMC IACI PRU GT ANPI.

Thu: CVS BRL CLX WPI PIXR IMGN ONXX GSF DISH RGLD MCK SINA BABY DLTR ISIS IPSU.

Fri: SIL REV OATS.

The stock market often tends to rise into a FOMC announcement. However, there's more concern about inflation this time. Nonetheless, if SPX rises to the low 1,160s, e.g. on Tue morning, that may be an opportunity to buy OEX May puts, for a quick trade. Perhaps, there will be a breakout of the roughly 1,140 to 1,160 range late next week.