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Bulls in Short Supply

By Paul Cherney Until the markets can demonstrate the ability to produce a day where up volume exceeds down volume on the order of four- or five-to-one, I have to assume sideways or basing action for the S&P 500 index, but sideways with a negative bias for the Nasdaq composite index.

Right now, there simply is not enough evidence (short-term) to suggest that the buyers are able to push prices higher, and sometimes that means that there are sellers yet to be satisfied.

There is a negative bias in place as long as the CBOE volatility index, or VXO, remains above 13.54.

Even though (on Tuesday) the S&P 500 managed a close above its trading range high, the Nasdaq was unable to accomplish that feat and it is the weakness in the Nasdaq that is a drag on the markets.

The S&P 500's trading range has been converted to immediate

support at 1,194.78-1,175.61. Additional support for the S&P 500 is 1,169-1,160.52. Next support under 1,160.52 is 1,142.05-1,090.19.

Immediate, well-defined support for the Nasdaq runs out at 2,066, the bottom of the trading range. There is flimsy support that runs to 2,052.80, but the next layer of reasonable support is 2,049.77-2,025.63, created right after the November elections. Next support is 1,981-1,900.

S&P 500 immediate

resistance is 1,185-1,195.98, then 1,205-1,209.53. There is more formidable resistance from July, 2001. The older the resistance, the less precise you can be, but here is the read from the 60-minute charts from July and August of 2001: resistance is 1,215-1,226.27.

Nasdaq resistance runs 2,100-2,116.75. Next resistances are 2,132-2,152, with a stacked shelf at 2,155-2,165.

Anytime resistance is exceeded it must be treated as support until broken. Anytime supports are broken they must be treated as resistance until exceeded. Cherney is chief market analyst for Standard & Poor's

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