By Paul Cherney The line of least resistance should still be for higher prices for another 10 to 15 trade days. The momentum generated by the lift off the 4/4/01 bottom should still have some residual (positive) effects on prices.
Last Wednesday (4/4/01), the Fed effectively cut the Discount rate for the fourth time in a row. Historically (since 1960) downside risk hase been limited in the week of a fourth consecutive Discount Rate cut. The worst performance by either index (the S&P 500 or the Nasdaq/OTC in the first 250 trade days AFTER the fourth rate cut) was a 9.83% loss in the Nasdaq. If the index replicated that performance, that would mean that the worst closing loss for the index over the next year would be a close of 1875.03. The S&P's worst performance (-7.91%) would equate to a close of 1140.22.
After reviewing charts over the weekend and looking at the configurations of the various measures of price, volume, breadth, and activity at the CBOE, I think the worst case for the next 10 to 15 trade days would be a close of 1168 for the S&P 500 and a worst case close for the Nasdaq looks like 1869.
Immediate resistance for the Nasdaq is 2075-2090 then immediately stacked resistance is 2093-2111. The index has another layer of resistance 2143-2182.
Immediate Nasdaq support is now 2030-1995 the next substantial layer of support (based on the charts) which is in the 1962-1868 area. I cannot rule out a retracement in the Nasdaq which prints in the 1962-1868 area.
The S&P 500 finished Monday's session in a test of immediate support which is 1238-1223. The next layer of support is 1212-1202 then 1193-1158. The index has immediate resistance in the 1253-1273 area. Cherney is Market Analyst for Standard & Poor's