The first chart below is a Nasdaq weekly chart that shows Nasdaq closed last week at the top of a multi-year rising wedge. Also, Nasdaq closed at 2,227 just below the upper weekly Bollinger Band at 2,228 1/2. Over the next few weeks, a consolidation below the top of the multi-year wedge is more likely than a break-out. A consolidation may take place in the upper half of the Bollinger Bands, while the wedge continues to narrow. If Nasdaq breaks-out, next major resistance is around 2,250 (upper monthly Bollinger Band and 80 month MA).

The second chart is an SPX daily chart. SPX is also near multi-year resistance, i.e. just below the 38.2% retracement from the 2000 peak to the 2002 trough, or the Fibonacci 61.8% level. Over the past month, SPX rallied from just above the Fibonacci 50% level, at 1,161, to just below the Fibonacci 61.8% level, at 1,253, and closed at a new four-year high at just over 1,248 on Friday. I also expect SPX to consolidate short-term. Support levels are at 1,230 to 1,235 and 1,220, which are congestion areas. Resistance levels are at 1,253 (Fibonacci level) and 1,264 (upper monthly Bollinger Band).

The stock market held-up well over the summer, had a quick "wash-out" in October, and has entered the seasonally strong period of October to May. Consequently, the market may rise higher after a consolidation period. The catalysts for a further rise are lower oil prices, anticipation of a pause in the Fed tightening cycle, and continued strong earnings growth. Oil closed at $57.21 a barrel Friday, and may continue to fall towards $50 over the next few months. The market may discount that after two more hikes in the Fed Funds Rate, in December and January, the Fed will pause or start an easing cycle. The economy continues to expand at above trend growth, which contributes to corporate earnings.

There are many high-quality stocks that failed to participate in the recent rally. Consequently, I'd expect price disparities to close somewhat in a consolidation phase. Many drug stocks e.g. PFE BMY LLY ABT AZN etc. remain out of favor, while other stocks e.g. LU FNM X INTC CSCO DELL etc. have become even more relatively undervalued. Nonetheless, oil stocks remained high and GOOG rose above $400. Oil prices and economic reports should continue to influence the market. The U.S. stock market will be closed Thursday for Thanksgiving. Economic reports next week are--Monday: Leading Indicators, Tue: FOMC Minutes, Wed: Unemployment Claims, Revised Michigan Consumer Sentiment, and Oil Inventories.

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

Arthur Albert Eckart is the founder and owner of PeakTrader. 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.