By Paul Cherney To my readers: This is the last publication of my comments at S&P. I feel privileged to have contributed to the Standard & Poor's tradition of objective, independent research, but I am moving to new fields of endeavor outside of S&P. Thank you for your readership.
The markets have conditions in place that can lead to upside of more than just a day, but it will require some "headline inspiration" to bring in buying other than short-term traders and bears covering shorts.
In my opinion, there are three factors that have the biggest potential to affect stock prices right now. The markets will be loot to the statement issued after the May 3 FOMC meeting to see if the word "measured" still included. They will also be keeping an eye on oil prices. Lower oil prices would be a positive; investors are concerned that the consumer's buying habits are being crimped by expenses at the gas pump. And on May 6, the Street will get the nonfarm payrolls number for April. The markets have been reacting positively to signs of strength and a big nonfarm payrolls number would probably inspire buying.
If a rebound in prices occurs, I think the upside would probably be limited to a test of the 1,190-1,206 area for the S&P 500 and 1,970-2,021 for the Nasdaq.
I think it would be a short-term negative, suggesting additional downside risk if there are closes below the following prices: S&P 500, 1,136.22; Nasdaq, 1889. So far, the pattern of quick, snap-back rallies just looks like counter moves in a downtrend, because the snapbacks have not attracted significant follow-through in the days that follow.
support looks extensive in the 1,893-1,852 area, with a well-defined layer at 1,889-1,867.
resistance is the former trading range: 1,904-1,962, with especially thick resistance at 1,929-1,937. Once resistance is exceeded, it becomes support.
The S&P 500 has support at 1,964.80-1,136.22.
Immediate intraday resistance for the Nasdaq is 1,927-1,933.42. For the S&P 500, it is 1,157-1,164.80, with especially thick resistance 1,159 and higher.
S&P 500 support is 1,155-1,146, overlapped at 1,152-1,136.22, which makes the 1,152-1,146 area a focus of support. The index also has support in the 1,147-1,120 area with a focus of support at 1,142-1,131, but a move below 1,136.22 would represent a new low for the current consolidation and that would open downside risk for a test of the 1,127-1,120 area.
Nasdaq support is 1,893-1,852, with well-defined support at 1,889-1,867.
Good luck in the markets. Cherney is chief market analyst for Standard & Poor's