By Paul Cherney
The CBOE's Equity Only Put-Call ratio as of 4:00 pm EST was 0.75. The Total Put-Call ratio was 0.91 as of 4:00 pm. I think prices are close to a tradeable short-covering rally, but my ideal recipe for a capitulation in this market would be an end of day Total CBOE Put/Call ratio of greater than 0.99 accompanied by large Nasdaq volume of at least 2.4 billion shares.
Prices are down, but the standard measurements of fear have not really registered the dire levels usually associated with a capitulation bottom. I am expecting another gap lower at the open on Tuesday and an intraday decline which could generate the "get me out at any price" sentiment needed to produce intraday readings associated with a capitulation (a Total Put/Call ratio greater than 1.00, and a volume surge as prices start to lift from the intraday depths on short-covering and bargain hunting.
There was no intraday surge in volume as prices started to rise midway through Monday's session. There is still too much complacency.
Immediate resistance for the Nasdaq is 1960-2004 with a focus of resistance 1976-1990. The next resistance is 2040-2070 then 2084-2124. Additional resistance is in the 2159-2239 area. There is a focus of resistance at 2188-2204.
The Nasdaq has immediate support at 1930-1770, inside this band of prices is a focus of support at 1887-1836. There is a good possibility that the lows for the session could occur within the first half of the day's session simply because the index is so oversold on a short-term basis (but I would need to see the signs of capitulation I have already described).
The S&P 500 has immediate resistance at 1197-1212 then 1228-1240. The S&P 500 finished Monday's session in the next layer of support which is 1193-1136 with a focus of 1180-1160.
Anytime prices move above a layer of resistance, that layer is then considered support. Anytime prices move below a layer of support, those prices are then considered resistance.
Cherney is Market Analyst for Standard & Poor's