By Paul Cherney
There are mixed technical signals for the Nasdaq. Early strength on Wednesday could easily prompt some profit-taking (see explanation below under Intermediate Term). Right now, I'm willing to risk being wrong in saying that downside appears limited, but a move below 2251 anytime in the next few weeks would tell me I was wrong. In the words of Jesse Livermore: "Markets are never wrong; opinions are." I can't change the markets, but I can admit I was wrong and change my opinion.
Wednesday has the potential to see consolidation and minor profit-taking.
POTENTIAL INTRADAY ACTION FOR WEDNESDAY: If the Nasdaq can print above 2476, some short-covering could easily push prices into the low 2500's, but without a headline easily recognized by the markets as unquestionably bullish, short-term profit-takers are likely to move in if the index can print above 2491.
The Nasdaq closed Tuesday's session in a test of intraday support in the 2448-2417 area. The Nasdaq has more substantial support 2373-2336. Immediate resistance for the Nasdaq is 2460-2476 then 2491-2547.
INTERMEDIATE TERM (3 - 4 WEEKS): The Nasdaq (and the S&P 500) are in the process of establishing a bottom. I expect prices to be higher by the time the Fed has their next meeting (Jan 31) when the Fed will probably announce (at least) another 25 bp cut in rates.
On a closing basis, I think we have seen the low close for this swing low pass but the upside should be a staggered and jagged affair because now so many market participants have first hand experience that profits aren't profits unless you close out the position, and that means that if you are long a positions and the price rises, that you have to sell to book a profit. This psychological outlook will make advances jagged affairs.
Cherney is Market Analyst for Standard & Poor's