Consolidation Would Be Natural

But even if some profit-taking does occur, it wouldn't diminish expectations for additional gains

By Paul Cherney

Some consolidation of the recent gains would be perfectly natural at anytime. Wednesday's price action was healthy.

If some profit-taking does occur (profit-taking which lasts more than just intraday), it would not diminish expectations for additional gains based on the study of price action in the S&P 500 in the wake of excessive VIX readings (in Monday's end of day comment).

Remember, these VIX studies are based on price action in the S&P 500, not the NASDAQ. In all likelihood the Nasdaq should participate in the upside also, but technically, the price performance percentages were based on S&P 500 daily closes.

The Nasdaq is in resistance 1315-1350 with a focus 1326-1339. The next layer of resistance looks very thick 1365-1402. Immediate NASDAQ support is 1307-1290 then 1264-1251.

The S&P 500 has resistance 876-934. Wednesday's close was above the focus of resistance (895-909), so this price level now converts to immediate support. The next resistance is 944-959.

The S&P 500 has immediate support 909-895 then 887-878. The index has considerable support in the 853-835 area.

Cherney is chief market analyst for Standard & Poor's

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