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A One-Day Bounce?

By Paul Cherney The crisis of confidence in the accounting methods used (at some companies) continues to weigh upon sentiment. This represents uncertainty. Markets hate uncertainty. The real uncertainty created by these accounting problems is:

How can you guess at a valuation for the marketplace when

you might not have a clear idea of what earnings really


Intermediate term indicators (for the next 10 to 15 trading days) are negative for both the Nasdaq and the S&P 500. These

indicators are momentum-based and will lag turns in the

market by 2 to 5 trade days.

On Tuesday I am expecting a short-term shake-out in the

morning and then an attempt to rebound which could see

gains on the day. These markets remain susceptible to

headlines (both good and bad).

The Nasdaq has intraday resistance at 1861-1878. Resistance becomes thick at 1901-1923. The Nasdaq has intraday support at 1823-1782 which looks like a likely spot for bargain hunting and short-covering (if prices reach 1823 or lower).

The S&P 500 index has well-defined intermediate term support

in the 1111-1052 area. There is a focus of support inside

this region at 1094-1080. This still looks like a likely

spot for bargain hunting and short-covering. (The low print for Wednesday, Jan. 30, was 1081.66.) The S&P 500 index has immediate resistance at 1101-1109 then resistance becomes thick at 1119-1129.40.

One day higher (an oversold rebound) looks likely for

Tuesday. But the intermediate-term charts look like they

have not established a bottom yet. Maybe Tuesday will

represent the second low of a double bottom. Cherney is market analyst for Standard & Poor's

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