By Paul Cherney From Cherney Market Analysis
I expect a case of the summer doldrums for the markets on Tuesday. I see low volume, price drift mostly sideways for the S&P 500, and sideways with a slightly negative bias for the NASDAQ. I don't think prices can drop hard without a headline.
Now that the Fed has made it clear that it plans to maintain its mechanical lifting of rates, where do the markets turn to find the inspiration for buying? Earnings and guidance. But those reports won't really ramp-up until the week after the upcoming holiday shortened week so the markets will really only have headlines out-of-the-blue and the June employment report on Friday, July 8.
A stronger than expected ISM index on Friday did relatively nothing for stock prices because the markets seem to be fixated on seeing data that would weigh on the Fed to stop raising rates. Based on that, I would have to conclude that in the twisted logic of the Street, it would be better for the markets to see weak nonfarm payrolls next Friday.
But the reality is that the Fed is not going to change attitudes, and if the markets are going to move higher, the Street has to abandon its fixation on when the Fed will stop. Sometimes the psychological shift to a little more aggressive buying is the Street's rationalization that the Fed wouldn't be raising rates if the economy weren't strong and a strong economy is good for earnings. That kind of logic might work for about a week or two.
Downside and upside are probably limited in the week ahead.
I think I might be wrong about the NASDAQ testing 2047 or lower, but until there is a close above 2076.16, a drift to test 2047-2045 area is still a possibility. These markets currently lack conviction to trend in either direction, but it would probably take a headline to force aggressive selling.
On Thursday, the NASDAQ closed below immediate intraday support at 2066-2057.48, and this opens downside risk first, to fill a gap at 2050.98-2045.31, which might provide a small bounce once filled, but that would be a mechanical, technical rebound. In order for that to generate something bigger to the upside the rise would have to attract some volume and there would have to be a price close (at the least) above 2076.16. Actually, I think any move above 2076.16 would see followthrough higher.
It still remains in the realm of possibilities that the NASDAQ will drift lower in search of aggressive buyers; a move back below 2052 would be an invitation for prices to revisit 2047-2027. With the gap at 2050.98-2045.31, that makes the 2047-2045 area a likely area for a bounce.
It would be unhealthy for the NASDAQ to print under 2039.69 for more than 4 minutes without attracting buyers to lift prices.
The S&P 500 has extensive sideways supports which makes it unlikely that the index will show a dramatic decline, but if the following layers are undercut, then that means that the buyers are not interested in ownership at the current prices and prices usually have to move lower until they reach levels that are interpreted as "bargains" in the short-term.
The S&P 500 has support 1194-1185.19, but more than 4 minutes under 1188 would not be healthy. The critical short-term price point on the chart is 1185.19. A close below this level would probably usher in a few trade days of summer doldrums sideways with a drift lower that ultimately might have to test the next layer of support which starts at 1178 and runs to 1159.96, this area of support is thick (strong) at -1173-1165.75.
Immdiate Intraday Resistances:
NASDAQ 2066-2076.16, even though resistance is stacked at 2077-2088, just a move above 2076.16 would be an intraday positive.
Immediate, inside the day S&P 500 prints above 1204.07 would probably mean a push higher, but it would take a close over 1208.84 to increase the chances for a leg higher.