By Paul Cherney
Historically, there is a slightly positive bias in place for the week leading into the Easter break. The last day of trading for the week (Thursday) historically, since 1961 has been a gainer 70.7% of the time, however the average of the performances for the day is just a gain of 0.22% (based on S&P 500 data 1961 through 2001 inclusive).
The end of the quarter is Thursday and quarterly management fees are based on the value of assets under management, marked to the market as of the close of trading on Thursday, (Mar. 28) so there is an inspiration among money managers to try to keep prices from falling which might delay a test of the Nasdaq 1745-1705 area.
The Nasdaq closed Monday's session below its 20 day exponential moving average of the close and odds are roughly 8 in 10 that the index will print in the 1745-1705 area. There is no specific time target, if the 8 in 10 odds are going to come in, it should happen within as few as 3 more trade days but maybe as many as 8 trade days unless some other technical condition emerges. Remember, 8 in 10 odds means that 2 times in 10 the signal is simply wrong.
Based on a review of the trading activity and price and volume movements for the S&P 500 in the week after the Easter break, I think the chances are good for an S&P 500 low on Monday or Tuesday (probably Monday) which should mark the beginning of a labored (but positive) advance for the S&P 500. (Sometimes just a 3 to 5 day rise, other times a more protracted move unfolds.) Also, I have an indicator based on the relationship between NYSE breadth and the price movements of the S&P 500 which looks like it could register a positive signal as of Monday's close.
The Nasdaq index has a layer of immediate support 1808-1773 with a focus 1803-1793. The Nasdaq has immediate intraday resistance in the 1824-1844 area, then 1851-1874.
The S&P 500 has immediate resistance 1142-1157. Resistance actually runs 1142-1174. The S&P 500 has immediate support 1130-1126. There is considerable support for the S&P 500 in the 1130-1107 area and if prices slip below the focus in the 1130-1126 area, this broader band has a focus 1119-1113 which should prevent further price deterioration.
Cherney is market analyst for Standard & Poor's