By Paul Cherney
I think it is very realistic to expect that the DJIA will come within 2% of its close before the WTC tragedy. History never repeats itself exactly and I'm sure there are any number of conditions which market observers could point to as to why "it's different this time," but for right now this is my view of the market until some other technical condition arises. I am not Jeanne Dixon. I am not Nostradamus. I refuse to try to predict headlines for exogenous events (exogenous to the markets).
I expect to see the DJIA close at 9400 or higher within the next 18 trade days (if it follows similar patterns I have identified from 1933 and 1930). The other major indexes should follow along or even gain more, but since the study was based on DJIA price action in the wake of a weekly loss of 10%, it is the price of the DJIA that I will use as my potential signal.
I have reviewed intraday charts for the S&P 500. The index's rebound from the capitulation selling in the week ending 9/21 has seen prices recapture the lower portion of the price range of Sept. 10. This is a natural spot for the price advance to stall because it represents the "breakeven" point for anyone caught long on Sept. 10. A "stall" does not necessarily mean a decline, it could be just sideways action.
Here are the immediate resistance numbers for the S&P 500: Immediate resistance should be found 1073-1096.94 with a focus of resistance 1085-1096.
Immediate support for prices during this upleg (started Sept. 21) is now 1046-1026.
Immediate NASDAQ support is now 1568-1545, then more substantial support 1528-1458 with a focus 1503-1472. The index has immediate resistance 1581-1629 with a focus 1584-1605. The intraday high on the first day of trading after the WTC disaster was 1629. The low from the 9/10/01 was 1669.94, so this represents a price gap in the chart.
Much of the NASDAQ's Wednesday rise was short-covering which is probagbly overwith in the short-term. The question is, how many sideline obsewrvers will step to the plate to support prices during retracement?
No trend sees every single day a gainer. A rise in the VIX and a close over 35.00 will probably signal the beginning of some losing sessions (as few as only one or two trade days, but maybe as many 5 trade days of lower closes. This VIX number changes everyday and I am guesstimating where the overnight systems run might put it for tomorow).
Cherney is market analyst for Standard & Poor's