By Paul Cherney In my Apr. 5 comment, I described the price pattern I would be looking for to potentially signal that there could be more on the upside. So far, the markets have not eliminated that possibility.
I think the biggest positive demonstrated in Monday's session was that the intraday support levels have held and there was no followthrough lower to Friday's retracement of Thursday's gains. I want to continue to see closing levels remain above the 50% retracement levels (50% retracement of the gains seen from Wednesday's low to Thursday's high). For the Nasdaq that would mean closes above the 1702 level. For the S&P 500 I would (ideally) like to see the S&P 500 maintain closes above the 1121 level.
These are the ingredients for an "ideal" rebound recipe. If the Nasdaq or the S&P 500 were to undercut the lows in place but in the process created a capitulation of sellers, then another shot higher fueled by short-covering and bargain hunting should follow.
Downside risk appears limited to me.
The Nasdaq has immediate resistance in the 1770-1980 area. Here are focuses of resistance within this band: 1794-1855, then 1907-1974. Technically, if the Nasdaq were to manage to close above Thursday's 1785.00 more buying should follow.
This week is tough for volume indicators because of the holidays. Anytime there is slow volume, it takes fewer like minded people to move the market in one direction or the other. I would like to see volume pick up on Tuesday while the markets advanced in price.
Immediate Nasdaq support is still 1752-1706 then 1698-1674.
Major S&P 500 resistance remains 1136-1190, within this band there is immediate (intraday) resistance in the 1155-1169 area then a focus of resistance 1171-1184.
Immediate support for the S&P 500 is 1139-1128 then 1117.50-1105. Cherney is Market Analyst for Standard & Poor's