By Paul Cherney From Cherney Market Analysis
Crude oil futures settled down $1.59 on Wednesday but the equity markets could not capitalize on the decline. This does not make great sense. Maybe caution ahead of the earnings warning season and concerns about the reputation of Septembers are preventing buyers from becoming aggressive.
On Wednesday there was bigger volume than on Monday, but hardly any improvement in prices. This makes me short-term concerned that there might have to be a stall in the advance.
I still do not think that the indexes can generate a significant run higher (a trend) at this time, and Wednesday's action increases my concerns that some sideways price action might unfold.
The S&P 500 and the Nasdaq are at key levels of resistance and this would be a natural place for a stall in the advance. I cannot write that my short-term momentum measures have changed, they remain positive, but they are trend following measures and the markets can turn lower before these measures will. The "key" levels of resistance I am referring to are Nasdaq 2177-2185.91 and S&P 500 1238-1242.62. I refer to them as "key levels" because like a key in a lock, movement past these levels on a closing basis can unlock the upside and force a buying wave. These are my interpretations of the chart. One of the most bullish things that can happen is a gap above the key resistance levels and a close above those levels. An event like this can ignite buying that creates a trend that no one believes. If the Nasdaq produces a close above 2185.91, if the S&P 500 produces a close above 1242.62, another extension higher would be expected.
I do not expect a break above key resistances right now. Some sideways price action might unfold as the markets exercise a little caution ahead of the earnings warning season. On a purely technical basis, a positive short-term condition is in place and my measures of momentum for the broader indexes (Russell based) remain positive, but a stall in the price advance can easily unfold.
The Nasdaq has resistance 2165-2185.91, resistance gets thick 2177.85-2185.91. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.
S&P 500 resistance is 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 intraday support is a thick shelf at 2163-2158.61; the next intraday support is a gap at 2147.31-2141 (intraday charts).
Nasdaq support is 2158-2140 and 2138.46-2130 (stacked at 2128-1212). Next meaningful support for the Nasdaq is 2106-2039 with a focus of support 2106-2076 (very strong and should hold). This has not been tested.
The S&P 500 has support 1228.96-1218, overlapped at 1219-1215. Next support 1206-1165 with a focus of support 1206-1183. This is a very strong layer of support.