By Paul Cherney
Unexpected strength in the January employment report and a 1.1% increase in December factory orders created real doubts that the Fed would make any intermeeting moves and traders used the headlines as an excuse to take profits.
In the process, my expectations for a trading range bound by 2700 (roughly) on the low end were simply proven wrong.
Now what? An intraday oscillator which combines price and volume on the Nasdaq has reached a level (on Friday) that has shifted the odds to heavily favor further down on Monday. This may prove to be only an intraday event, but further down is the historical odds-on favorite.
Immediate support for the Nasdaq (based on intraday prices) is 2644-2576.95. The Nasdaq's low print on 1/16/01 was 2576.95 and prints in this area (if they occur) should bring buyers to the market and reverse prices for a rebound. Followthrough on the rebound (a price advance of more than just a couple of trading hours) is the real question mark and I'll be assessing intraday volume measures on Monday for a better picture of the momentum created should the expected reversal unfold.
The Nasdaq has a price gap between 2661.26 and 2638.22 which will be filled in Monday's session.
Former support is now resistance. Which makes immediate NASDAQ resistance 2686-2743.
Immediate Nasdaq resistance is 2797-2827 then considerable resistance is 2840-2873. The Nasdaq has stacked resistance and the next layer is 2873.64-2892.36.
The S&P 500 has immediate resistance in the 1353-1368 area. The index has broad and substantial resistance 1351-1389. The index is currently testing a level of support in the 1350-1342 then 1335-1325.
Cherney is market analyst for Standard & Poor's