A More Positive Tone

Higher prices by the first two trading days of the new year seem very likely for the Nasdaq

By Paul Cherney

The VIX's (market volatility index) move back below its 10-day exponential moving average re-establishes a more positive tone for prices. On Monday, near the close, the VIX's 10-day exponential was near 31.50.

Because there might still be some unwinding of expiration-related positions, a negative close is still possible on Tuesday, but the markets have established a sideways consolidation from the last week in October until now which looks like it will support prices when tested.

Support: The S&P 500 has multiple stairsteps of support which makes a dramatic decline unlikely. Supports include 897-887, then 884-867. There is considerable price traffic (support) in the 883-875 area.

Immediate support for the Nasdaq is now 1393-1385, then 1375-1367 and 1347-1317.

Resistance: The S&P 500 has resistance at 932-965. Immediate intraday resistance is 915-926.27 and 932-944. The first move into the 915-926 area might run out of momentum without a headline of undeniably bullish importance to bolster confidence.

The Nasdaq has immediate resistance at 1381-1412, then 1407-1426, which makes the 1407-1412 area a focus of resistance. Due to the price action of Dec. 4 through Dec. 6 there is a well-defined ledge of resistance at 1411-1430.12, and this area will probably rebuff the first test (unless there is a headline of undeniably bullish importance). Higher prices by the first two trade days of the year seem very likely, but the first test of this area might cause a stutter in the Nasdaq.

Cherney is chief market analyst for Standard & Poor's

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