By Paul Cherney
Barring headlines I cannot predict, Friday has the potential to be the lowest trading volume of the year. Thin markets can be unpredictable.
I still believe that there should be some sort of stabilization for prices and then a rebound, I have reviewed the price action surrounding the other times that I have recieved the oversold readings that I have seen in my weekly based studies of S&P 500 prices and NYSE volume, and there really is nothing out of the ordinary aboout the current price action.
I will say that in previous signals, the first move below the 10-day exponential moving average of the VIX has been a valid trigger, and that did not happen this time, we had a close below the 10-day exponential moving average of the VIX but it reversed the very next day. I think another move below the 10-day will coincide with a more protracted upleg in the market (This is based on S&P 500 price data).
The Nasdaq has immediate resistance is 1366-1381.60 then a small shelf 1390-1408. The more considerable resistance is 1425-1436.43.
The S&P 500 has immediate resistance 954-969. then 978-984.58.
Nasdaq support: Immediate support is 1358-1345. There is especially thick support 1337-1295 with a focus 1333-1316. I have looked at long-term charts for the Nasdaq and the 1380-1200 area looks like a band of solid support, which will act as a floor for prices. (The 1380-1200 layer is from the years 1996-1997.)
Immediate support for the S&P 500 is (967-944). I have looked at long-term charts of the S&P 500 and we are at the level 960-926 (from late 1997), which should act as a floor for prices. If there is some sort of a capitulation of sellers which pushes prices below 926, to a close below 926, I would expect to see a traditional panicked capitulation sell-off on the next trade day (and a reversal to up).
The longer-term oversold levels reached in my weekly S&P 500 price and NYSE volume data might simply be wrong, but so far, the jagged, choppy price action is pretty typical of other bottoms. These indicators are based on weekly data and they do not pinpoint the exact day of the low close.
Cherney is chief market analyst for Standard & Poor's