By Paul Cherney From Cherney Market Analysis
In the short-term, measures are in place that can precede a bounce.
I still think the markets have the tendency to drift lower to test the supports starting at S&P 500 1206 and Nasdaq 2106. But with Friday's end of day data, the markets are short-term oversold on several measures and a small rebound in prices is likely. This creates the possibility for some sideways with a positive bias for a couple of more trade days. Obviously, a drop in oil prices would increase the potential for short-term gains.
Both the Nasdaq and the S&P 500 have already had closes below price levels that suggest to me weaker prices for a test of supports S&P 500 1206-1183 and Nasdaq 2106-2076 and unless I see a close in the S&P 500 over 1239 (changed since yesterday) or a close in the Nasdaq over 2175 (changed since yesterday), I will expect some sort of a drift lower. The supports mentioned are not that far from current prices.
Right now, we are in the summer doldrums when thin volume can see flat trade or volatile trade. At this time I do not think that there can be a big downdraft unless there is a headline of undeniably bearish importance. I do not think that a drop to 1206 or slightly lower for the S&P 500 or 2106 for the Nasdaq constitutes a "big drop."
I had expected a little more on the upside after the oversold readings generated by Friday's markets.
Sixty-minute measures are neutral, while dailies are slightly oversold. I would have to guess a little lift tomorrow even though I still expect that prices will have to migrate, drift slowly lower to test Nasdaq 2106 and S&P 500 1206 and lower.
At 8:30 a.m., July Durable Goods orders. The Street expects -1.2%, June was +2.8%
At 10:00 a.m., New Home Sales for July. The Street expects 1.325 million annualized rate, June was 1.374 million.
At 10:30 a.m., oil inventory reports. In my view of the crude oil futures chart, there is not great confidence in higher prices being expressed by the chart action, but it is the reaction to the inventory numbers that will dictate trade.
Nasdaq immediate intraday resistance is a shelf 2139-2145.71, stacked at 2146.49-2157.98 (focus 2151-2158). Then 2165-2185.91, resistance gets thick 2177.85 and higher. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.
S&P 500 intraday resistance is a shelf 1222.50-1225.08, there is another shelf of resistance 1222.64-1227.61. Focus of resistance generated by overlapping ranges is 1222.64-1225.08. Resistance is stacked and formidable at 1229-1239.76. A combination of several intraday plateaus creates a focus of resistance at 1238-1242.62, but resistance runs all the way 1245.81. The next focus of resistance above 1245 is 1249.23-1267.
Nasdaq immediate intraday support is 2135.69-2122.86. The next well-defined layer of support is 2106-2039 with a focus of support 2106-2076 (very strong and should hold if tested).
The S&P 500 has immediate intraday support in the form of a thin shelf 1219-1215. This was undercut in Tuesday's session, but buyers lifted prices. New shelf of support is 1219-1214..44. The next meaningful support for the S&P 500 is 1206-1165 with a focus of support 1206-1183 (very strong and should hold if tested).