By Paul Cherney End-of-day momentum measures I use have switched from a negative bias to neutral. This represents an improvement and in my opinion increases the chances for additional upside on Friday, Feb. 25. The simple fact of the matter is that last week, indicator configurations started lining up to suggest lower prices, we had lower prices, but after Tuesday's close, probes lower in price have been attracting buyers, not sellers.
Granted, these buyers have not been terribly aggressive ("aggressive" meaning willing to buy regardless of price) and there has not been a powerful increase in volume, but price is now moving higher, not lower. The bears are giving up short-term and they have to buy to exit short positions. Without a headline to affect trading overnight Thursday, I would expect to see higher prices Friday, with the majority of the gains seen in the first hour of trading.
A decline in oil or a rebound in the dollar would create an intraday atmosphere that would promote more buying, and just the opposite (higher oil, weaker dollar) would probably cap advances.
The Nasdaq composite index has immediate
support at 2,047-2,036. A move below this level would be a short-term negative. If there were a move below 2,023.00 it would be a negative, too.
resistance for the Nasdaq is a small shelf at 2,052-2,064.67. There is a substantial layer of resistance at 2,068-2,103.45; inside this layer, the resistance is thick at 2,074-2,089.21. One of the big problems with the attempts to move higher that ended Feb. 15 and 16, and Feb. 7 and 8, was that while price had moved higher, there was no technical evidence of a stampede of aggressive buyers. The current short-term lift might suffer the same fate (failure to follow through), so I will need to see a day or two when up volume swamps down volume to suggest that this lift is something more than just an energetic lift fueled by short-covering and short-term momentum players. Bigger volume would increase the chances that investors, whose time horizons are greater than "intraday" or just "a few trade days," have taken an interest in putting money to work on the long side.
For the S&P 500 index, immediate resistance is a small shelf at 1,197.35-1,202.92. The index would be revisiting a thick layer of resistance with any prints above 1,209, but the most recent attempt to break higher have been thwarted at 1,212-1,217.90. Resistances are stacked and overlapped at 1,215-1,226.27, making the 1,215-1,217.90 area a focus of resistance.
The S&P 500 has had a close under a critical layer of support at 1,190-1,185.63, but buyers have moved in. If there is a retracement that undercuts 1,184.16 that would be a big negative and I would expect follow-through lower. S&P 500 1,184.16 was the low and close on Tuesday, Feb. 22, when the S&P 500 closed under 1,185.63). On the daily charts there is S&P 500 support at 1,184-1,160, inside this support are shelves. The biggest support looks like 1,178-1,163. Next support is 1,142-1,090.
The 30-day exponential moving average of the VXO, a measure of price volatility in option contracts based on speculation in the S&P 100, was 12.17 near the close of trading on Thursday. VXO prints above this level would probably coincide with negative price action in equities.
Anytime supports are undercut they convert to resistance until broken. Anytime resistances are exceeded, they convert to supports until proven otherwise. Cherney is chief market analyst for Standard & Poor's