By Paul Cherney
The possibility for a Nasdaq close between 1762 and 1781 as of the close of trade on Tuesday, May 21, appears dead.
I have nothing definitive about the prospects for tomorrow. Monday's decline was on light volume which, under these price conditions, I have to consider a neutral to slightly positive. I really prefer to see declines in price generate big volume, though, because that tells me that the sellers (which represent resistance to an advance) are being satisfied. When there is big volume in a decline and prices then reverse and generate a surge in volume, that tells you that the sellers have sold and the sidelines are emptying as buyers rush onto the playing field.
Immediate resistance for the Nasdaq is 1713-1733. The next resistance is 1736-1749, and after that, a small shelf from 1752-1760.
The Nasdaq index has a broad band of resistance at 1736-1769. MAJOR resistance is 1777-1832.
Immediate support for the Nasdaq is 1711-1691, with a focus at 1707-1700.
The Nasdaq has a critical layer of support at 1711-1691. Nasdaq 1691.42 is the low the index printed on Tuesday, May 14. The 1691.42 level represents the beginning of a gap in the intraday price chart which runs 1691.42 - 1653.10. Price gaps do not have to get filled, but a decline which fills part of this gap seem likely. If the decline into the gap can bring buyers in off the sidelines (see volume surge), then a lift in prices (a day or a day and half) could follow, but I remain concerned that too many people on the sidelines are comfortable there and that money is waiting for more definitive and consistent signs that an earnings recovery is for real.
The S&P 500 has resistance at 1102-1114.73; there is a focus of resistance at 1105-1109. The next layer of resistance is directly overhead at 1117-1133.31, with a focus at 1122-1127.
Immediate intraday S&P 500 support is a small shelf at 1096-1085. The index has well-defined support at 1087-1064, which makes the 1087-1085 area a focus of support.
Cherney is chief market analyst for Standard & Poor's