By Paul Cherney
End-of-day indicators remain negative but have lost their downside momentum, which keeps the possibility for a short-term lift in prices in place. However, significant follow-through higher is not likely with the current technical conditions in place.
The VIX (market volatility index) managed to close below its 10-day exponential moving average on Monday, Feb. 3. The 10-day exponential was 34.18 near the close, but the current VIX levels are right at support 34.45-31.64 and the congestion in the chart might stem the index's decline. As long as the VIX is below its 10-day exponential it should be considered a background positive.
There was nothing robustly bullish about Monday's price action, but it was positive. On a short-term basis, the markets are technically oversold, but there is not enough technical strength to suggest that anything significant to the upside will unfold.
The Nasdaq has immediate intraday support at 1333-1320. The index has a layer of substantial end-of-day buying support which runs 1320-1280; there is overlapping support at 1298-1265, which makes the 1298-1280 area a focus of support.
The Nasdaq has immediate intraday resistance at 1336-1345. The index has substantial resistance at 1358-1383.
The S&P 500 has support at 852-844. The S&P 500 printed an intraday low of 840.34 in Friday's session, this has increased the chances for a test of the support established in October, 2002, which is 806-768. There is no timetable for a test. Often, a 61.8% retracement of a move can spark a short-lived jump in prices and we currently might be experiencing that right now.
Immediate resistance (intraday) for the S&P 500 is 862-868.72. Thick, substantial, resistance is 876-890, and if there is a rebound from short-term oversold conditions (and the 61.8% retracement) then this 876-890 is a likely spot for the rebound to run out of upside momentum. Other technical conditions could arise.
Cherney is chief market analyst for Standard & Poor's