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A Breather for the Bull

By Paul Cherney Short-term measures are ripe for a brief spell of profit-taking, but, sometimes, in a one-way (up) market like the current market, expectations for some profit-taking precede only sideways, tight-range price action for a day or two before another wave of buyers moves in. There was no lack of buying interest on Wednesday as prices started out weak, but buyers moved in. This is typical of a bull trend in prices.

Longer-term momentum measures remain positive.

Downside appears limited because momentum measures have registered levels which usually mean residual positive momentum is in place, When this is the case, the first pullback in price, even a decline of two or three trading days, is usually viewed by the markets as a buying opportunity.

Near the close on Wednesday, the 10-day exponential moving average of the VXO close was 16.19. If the VXO moves back above 16.19, that would probably be coincident with weaker stock prices that might last more than just intraday. Until that happens, the trend is for higher prices. A low VIX or a low VXO is not a danger in and of itself; the only danger comes when the VIX or the VXO starts to rise and exceeds resistance levels. That has not happened in this market.

Immediate intraday

support for the S&P 500 is a small shelf at 1,124-1,119.90. Supports are stacked with additional support at 1,118.48-1,113.69, then 1,106-1,100. The broad support is 1,106-1,068 and 1,083-1,053, which makes a focus of support 1,083-1,068. Price support thickens with prints of 1,096 and lower.


resistance for the S&P 500 is 1,116-1,133, then 1,151-1,176.

Immediate support for the Nasdaq is 2,062-2,047, then 2,037-2,027, then 2,022-2,010. Considerable support exists at 2,001-1,986, then 1,974-1,960.

The Nasdaq is an old band of resistance on the daily charts which runs 2,026-2,105.

There is virtually no competition for an investment dollar. Downside appears limited, but after the earnings reports for the fourth quarter, the upside might be limited, too, as the markets digest some of the gains of the past 15 months. Cherney is chief market analyst for Standard & Poor's

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