By Paul Cherney
The underlying trend for higher prices remains in place.
I would like to have seen more volume coming into the market on Friday, but maybe there has been an early start to the sumnmertime Friday syndrome (lower volume late in the session as traders leave early for the weekend.)
Usually, when I see the kind of momentum (positive) demonstrated by the breadth and the price movement we saw in the wake of the Fed's rate cut on 4/18/01, I expect to see a high established, then a retracement and then another move higher to retest the highs in place. On 4/19/01, both the Nasdaq and the S&P 500 set closing highs in the wake of the Fed's announcement, those high closes were Nasdaq 2182.14 and S&P 500 1253.70.
Last week we set a high, this past week we saw retracement, and in the week ahead, I expect to see a move to test the 4/19/01 highs. (Obviously, I'm not going out on a limb with this prediction for the S&P 500 because it closed Friday at 1253.07 and the 4/19/01 high close was 1253.70.) But this leads me to repeat my comment from yesterday: The S&P 500 is on firmer technical ground than the Nasdaq.
The Nasdaq has been running into a wall of resistance in the 2076-2096 area, but sometime next week it should move above this level and attempt a test of the 4/19/01 high close of 2182.14. Volume, price action and breadth at the time of that retest may offer insight into the likelihood of additional gains above that point. Immediate support is 2046-1995. If the Nasdaq broke below the 1995 level without garnering buying interest in only 3 or 4 minutes, then downside risk opens for prints and a close in the 1962-1868 area, there is a focus of support 1943-1919. (I do not expect this to happen.)
On Friday, the S&P 500 closed at the beginning of a layer of resistance: 1253-1273. The next resistance is 1300-1341. Immediate support is now 1238-1223.
Cherney is Market Analyst for Standard & Poor's