By Paul Cherney
Measures are negative for both the Nasdaq and the S&P 500.
I think it is going to take a headline related to Iraq -- or a development on the terrorist front -- to generate something more than just a day or a two of short-covering lift in prices.
For intraday action on Wednesday, some key VIX (market volatility index) levels might prove important. Expect a flat market with a slightly positive bias if the VIX hovers in the 37.90-36.87 area. A move below the 36.87 level should coincide with more aggressive short-covering, which could produce gains on the order of 1%-plus for the S&P 500. If the VIX can move below the 36.22 level, then bears are probably scrambling to cover shorts. Another potential signal from the VIX would occur if the index shot above the 40.00 level and then retreated to print below 38.00.
Any headline interpreted as relief of the uncertainties on the Iraq front and the terrorist front will serve to prompt bears into buying to cover open short positions.
Immediate intraday resistance for the S&P 500 is 804-810.59, then 815-826.
Immediate intraday resistance for the Nasdaq is 1277-1310, with a focus of 1279-1285.
Immediate resistance levels which do not appear likely to give way unless there is a headline perceived as bullish by the markets are: 835-852.87 for the S&P 500 and 1331-1353 for the Nasdaq.
The S&P 500 has support at 806-768.
The Nasdaq has support at 1273-1261, then 1222-1188.
Cherney is chief market analyst for Standard & Poor's