By Paul Cherney
Based on NYSE breadth measures, I think I will probably get an oversold signal in the overnight systems run which would carry good odds for at least positive closes on the day (Tuesday).
If there is an opening drop in prices it will probably represent a short-term capitulation and the prelude to an intraday lift in prices, but without a positive headline, the upside would be very limited, a positive close (probably), but limited. There was nothing in today's price and volume which would suggest that the overall look of the end-of-day indicators would change, they will still be negative, but markets don't go down everyday.
With the VIX (market volatility index) above its 10-day exponential moving average, it is better to wait for the headline that produces buying interest rather than try to predict it, but one of the intraday signs that bears might be moving as a group to cover open short positions would be a drop in the VIX. To me, the chart of the VIX would start to look more accomodative to the bulls if the VIX could move below Monday's open which was VIX 38.35. The VIX's 10-day exponential moving average was near 32.30 at Monday's close.
Immediate intraday Nasdaq resistance is 1332-1340.36. The next resistance is a small shelf at 1352-1358.88; substantial resistance is 1358-1385.
The Nasdaq has slipped under support which was 1345-1327. Next support is 1319-1277. If the NASDAQ printed 1315, it would represent a 50% retracement of the gains seen from the Oct . 10 low to the Dec. 2 high and that would be a sign that the bears and the bulls are at equilibrium, making it a coin toss as to whether prices will retrace to the October support of 1157-1108.
Immediate S&P 500 intraday resistance is 852-860.50, then 866.76-871.75. More substantial resistance is 876.89-882.55.
The S&P 500 has support at 847-824. The S&P 500 would have to print 840 to increase the chances for a drop to test the support at 806-768. If 840 is printed, there is no timeframe for a retest of the 806-768 layer of support.
Cherney is chief market analyst for Standard & Poor's