By Paul Cherney From Cherney Market Analysis
With higher oil prices and higher stock prices on Thursday, the market created its own conundrum. One aspect of the day that was puzzling to me was that the lift in prices late in the session did not generate the confirming volume I like to see on a rise.
The potential for a one day shake-out in the Nasdaq remains in place. In the event I am wrong, it would take a move in the Nasdaq above the 2195 level to increase the potential for an extension higher.
Both the Nasdaq and the S&P 500 are at levels of heavy resistance that I expect to cap gains, but if I am wrong, prices will tell me so if the Nasdaq moves above 2195, or the S&P 500 moves above the 1245 level.
If there is a day or two of broadly based declines, I am pretty sure I will get an oversold reading in one of my NYSE breadth measures. This can produce net positive price action for 5 to 7 or 8 trade days. Some of the end-of-day indicators I watch are in configurations that accompanied the last time I had one of these oversold breadth signals (nothing is ever exactly the same): after the last signal, the S&P 500 managed to see net positive action, but over the course of 7 trade days it only managed a gain of about 1% (this signal came as of the close 3/29/2005). I do not know whether selling will get bad enough to produce this oversold signal, but if it comes I consider it a pretty reliable signal.
This is still the case: The nature of the S&P 500 chart makes it doubtful to me that there can be a huge drop, but conditions right now are not strongly positive.
Nasdaq immediate resistance is 2165-2185.91; resistance gets thick at 2177.85 and higher. Next resistance is 2189-2207.79; resistance is well-defined (strong) at 2201.91-2207.79, then 2211-2249, with a focus at 2211-2233.33. Resistance gets thick at 2225-2233. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.
S&P 500 intraday resistance is 1229-1239.76. A combination of several intraday plateaus creates a focus of resistance at 1238-1242.62, but resistance runs all the way to 1245.81. The next focus of resistance above 1245 is 1249.23-1267.
Nasdaq supports are stacked, and it is usually difficult for prices to drop through stacked support unless there is a headline of undeniably bearish (or sentimental) impact. The Nasdaq index has support at 2167-2144.78; a move below 2144 does not find the next well defined layer of support until 2106-2076 (very strong and should hold if tested).
The S&P 500 has immediate intraday support at 1231.79-1222.67. There is a thin shelf at 1219-1215; the next meaningful support is 1206-1183 (very strong). The comments I made about the Nasdaq 2165.44 level (buyers less willing to make a whole-hearted commitment) apply to the S&P 500 1219.80 level; a close below this level would increase expectations for a sideways market, not aggressively positive or negative.