By Paul Cherney Late in the session on Thursday, Apr. 22, 60-minute measures for both the Nasdaq and the S&P 500 hit overbought levels which usually see prices consolidate gains. The overbought readings were registered for both the Nasdaq and the S&P 500. This pushes the odds (combined with my own view of the chart patterns) to suggest a sideways day on Friday, Apr. 23, that could see a slight loss for the day (both indexes).
Thursday's price action is turning intermediate-term indicators higher, suggesting that a brief period of retracement or sideways price action (maybe a day, or a day and a half) should attract more buyers to lift prices.
Here is another update to the technical study I did last week that looked at the price action in the S&P 500 after the a move in the ratio of decliners to advancers at the NYSE of over 6.0 comes into play. Since the S&P 500 has had negative closes since the Apr. 13 signal date (the close on the day of the signal was 1,129.44 and Tuesday, Apr. 20, saw the S&P 500 close at 1,118.15), I eliminated all the previous signals which never posted a negative close and recalculated the average performances of the best closing gains. Once I eliminated those signal dates, the average of the best closing gains during the first 22 trading days after similar technical conditions in the past became a gain of 3.86%, which for this market equates to an S&P 500 close of 1,173.04 sometime on or before Thursday, May 13, 2004.
Remember, that's just an average performance price. The S&P 500 might or might not reach that level on or before May 13, but right now, price and volume measures are moving in the right direction to support the notion of higher prices yet to come. (The study was based on signal dates when the NYSE decliners divided by advancers was over 6.0 and the S&P 500 closed the session in the upper half of both its 50 and 100 day trading ranges.)
The CBOE volatility index, or VXO, is now below its 10-day exponential
moving average, and I view that as a background positive for stock prices. Near the end of the trading session on Thursday, Apr. 22, the VXO's 10-day exponential moving average was 15.75.
resistance is a band at 2,037-2,079; inside this band, there is thick resistance at 2,048-2,064.
The S&P 500 is inside a layer of resistance of 1,135-1,149. The index has stacked resistance. The next layer of S&P 500 resistance is 1,149-1,176.97, with especially thick resistance at 1,149-1,158.98. The March, 2002, charts show a well-defined layer of resistance for the S&P 500 at 1,166.27-1,173.94.
The S&P 500 has immediate intraday shelf
support (thin) at 1,138.42-1,134.21, then 1,125.72-1,116. If there is a retracement, it would be better for the bulls, a sign of buying demand, if prices were able to attract buyers to prevent prices from undercutting a layer of well-defined support which runs 1,124-1,120.82. The longer-term band of support is 1,125-1,102. There is thick support at 1,125-1,113. Wednesday's intraday low was 1,116.03.
Immediate Nasdaq support is: 2,019-1,960. There is a layer of especially well-defined support which starts at 1,985 and runs to the 1,960 area. The Nasdaq's intraday low on Wednesday was 1,973.25. Next support is 1,920-1,896.
Immediate intraday support for the Nasdaq is now 2,027-2,019, more substantial intraday support for the Nasdaq is 1,994-1,973, with a well defined shelf at 1,993-1,984.37. If there is a retracement which pushes prices under 2,019, it would be a positive to see buyers prevent prices from undercutting 1,993-1,984.37. Cherney is chief market analyst for Standard & Poor's