By Paul Cherney
I think the downside is limited for the next couple of weeks and a modest trend higher should unfold.
The July employment report will be issued at 8:30 am EDT. The Street expects a slight uptick (+0.1%) in the unemployment rate to 4.6%. The nonfarm payrolls are expected to be down about 50,000. I don't think either of these numbers has the ability really move the markets.
Tomorrow is Friday, and this is the summertime. Volume will be light, when volume is light it takes fewer like-minded individuals to move prices.
It was in August 2000 (after the earnings reports and the warnings were fading from memory) that the markets (S&P 500 and Nasdaq) put in a consistent trend higher (all on low summertime volume). And the chance for that happening now are good. Retracements should be shallow.
The Nasdaq has a thin shelf of intraday support in the 2066-2053 area, more substantial support is 2040-2016 and this is considerable (strong) support which I do not think will be violated.
The Nasdaq is testing immediate resistance in the 2069-2105 area, within this resistance is a focus of resistance 2069-2083. The next resistance is a brick wall at 2137-2181.05 and this is the likely area for some profit-taking.
The S&P 500 has stacked supports from 1207 through to 1190. The next support is 1184-1174. The index has resistance 1217-1223 but Brick Wall resistance (and a likely spot for profit-taking) does not occur until 1227-1242.)
Cherney is Market Analyst for Standard & Poor's