By Paul Cherney In Monday's session, the IBM warning forced prices lower, into support areas on the chart that I expect to hold on a closing basis. But the extremely low volume on the day (right or wrong) says to me that the price action was only short-covering and some bargain hunting, the work of short-term traders. I do not think long-term investors were coming in off the sidelines or the volume totals would have been something on the order of NYSE 1.5 billion shares and Nasdaq 2.0 billion shares.
I think Monday's action confirms that the markets have support directly under current prices and that downside is limited, but I do not think that means we are at the beginning of a sustained rocket-shot higher.
Until the markets demonstrate the ability to overcome resistance levels, I have to assume sideways action. I think that investors still have a reluctance to commit to the long side ahead of the first earnings reports. But I would change my opinion if the Nasdaq closed above the 1805 level, or if the S&P 500 closed above 1136).
Immediate Nasdaq support is 1765-1742. The S&P 500 has a focus of support 1119-1113.
Immediate intraday resistance for the Nasdaq is 1786-1803 then 1808-1822.
The S&P 500 has immediate resistance at 1126-1136 then 1142-1157.
The S&P 500 has immediate support at 1124-1106, with a focus at 1119-1113. If tested, this area should hold on a closing basis and still has the tential to produce a rebound in prices. Cherney is market analyst for Standard & Poor's