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The NYSE Oscillator indicates the stock market is near or has reached an intermediate-term peak. The two charts below are same period weekly charts of the NYSE Oscillator and SPX. There`s generally a positive correlation between the Oscillator and SPX. Normally, when the Oscillator is around 50, SPX is near a short-term top, and when the Oscillator is around negative 50, SPX is near a short-term bottom.

Currently, the Oscillator`s 10-week MA (blue line) is about 27, which is the third time over the past five years it has risen above 25 (see orange arrows). Each time the Oscillator`s 10-week MA has been above 25, SPX has pulled-back at least 5% within three months (also shown in older charts). Moreover, each time the Oscillator`s 10-week MA topped just below 25, SPX pulled-back at least 5% within three months (see gray arrows).

SPX upper resistance is 1,315 (previous multi-year high). Another (lower) resistance level is just over 1,300 (current weekly upper Bollinger Band). Short-term major support is 1,275 (prior high), and intermediate-term major support is 1,246 (also, a prior high). SPX has become less volatile over the cyclical bull market. Consequently, there hasn`t been a 10% correction throughout the three-year bull market. 10% corrections take place every 1 1/2 years on average. Therefore, the risk that the next pullback will be greater is high. A 10% fall from 1,300 is 1,170.

Charts available at PeakTrader.com Forum Index Market Overview section.

Arthur Albert Eckart is the founder and owner of PeakTrader.com Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

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