The summer driving season ends after Labor Day. President Bush urged Americans to conserve gasoline. Many Americans canceled driving plans for the Labor Day weekend, because of price spikes in retail gasoline. There were thousands of complaints about price gouging at gas stations last week. European governments are shipping oil and refined products to the U.S. The U.S. government opened the Strategic Petroleum Reserve, to oil firms, and suspended restrictions on regional gasoline standards. The strong U.S. economic expansion has been slowing, and may continue to slow in coming months.

Oil and gasoline may have hit short-term tops on Tuesday, while it seems oil stocks had "blow-off" tops (opposite of capitulations) Wednesday and Thursday. Consequently, oil stocks may be in a volatile range over the next few weeks, along with the stock market in general.

The first chart below is an OIH weekly chart. Last week, OIH, an oil ETF (i.e. basket of oil stocks) traded between 112 and 122. I suspect, the volatile trading range will continue, while oil stays in the $60s. OIH has major resistance in the low 120s and major support in the low 110s. So, there may be excellent opportunities to trade OIH options (or options on other oil stocks) next week.

The second chart is an SPX daily chart. There`s significant short-term support around 1,200 (i.e. psychological support, 200 day MA, and Parabolic SAR buy signal). Last week, 1,225 was resistance. If SPX holds 1,225, it may trade up to 1,245 (recent high), and 1,253 (multi-year Fibonacci level). However, SPX has open gaps at 1,174, 1,143, and 1,138.

September options expire in two weeks. Some current September Max Pain expirations are: SPX 1,220 with the value of calls 150% more than the value of puts (which is bearish, because the put/call is a contrarian indicator). SPX closed at 1,218. OEX 565 with the value of puts 130% greater than the value of calls (which is bullish). OEX closed at just over 563. QQQQ 39 with the value of puts 15% more than the value of calls. QQQQ closed at 38 3/4. Volatility normally picks-up two weeks before options expiration.

Economic reports next week are: Mon: None (market closed for Labor Day), Tue: Revised Productivity, and Fed`s Beige Book, Wed: Unemployment Claims, and Wholesale Inventories, and Fri: Export & Import Prices. Also, in September, the FOMC meeting, earnings warnings, and end-of-the-quarter window dressing should influence the market.

The uncertainty of oil and gasoline prices, and economic data, caused by hurricane Katrina should contribute to volatility over the next two weeks. The stock market may continue to consolidate, short-term, until earnings warning season in late September, and third quarter earnings in October.

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