By Paul Cherney
The breaks above the ABC formation Point B breakouts of 1425.73 for the Nasdaq and 895.90 for the S&P 500 have increased the odds for tests of the S&P 500 918-935 area (with a focus of 924-931) and the Nasdaq 1460-1474 level. Prints in these areas look like natural spots for short-term traders to book profits, which could stall the advance for a day or two.
Higher stock prices are likely until there is a reversal in the VIX (market volatility index) or a surge in prices which brings a flood of sellers to the markets and sees prices close below opens on large volume, something on the order of Nasdaq total trading volume for the day of 1.74 billion shares. For the NYSE, it would be something near 1.68 billion.
The increase in prices today was accompanied by a nice increase in the volume, over 50-day moving averages, but the volume has not shot into the stratosphere -- which could signal a short-term buyers' capitulation.
Supports: Immediate supports are stairstep.
Immediate S&P 500 supports are 900-895, 887-877, 871-862, then 861-852.
Immediate Nasdaq supports are 1426-1409, 1405-1392, 1382-1371, then 1357-1336.
Resistances: S&P 500 resistance is/was 887 to 911; the next resistance is 920-935, with a focus of 924-931. The next resistance is 951-965.
The Nasdaq has two focuses of resistance created by the price action near the January, 2003, top and the November, 2002, top; they are 1433-1467 and 1445-1474.69. These resistances overlap at 1445-1467, and this looks like a likely spot for some short-term profit-taking which could stall the advance (assume briefly). If there is a stall and prices retreat to find buyers at or above the immediate support of 1426-1409, another leg higher, a new ABC pattern, could be forming which might ultimately test the 1495-1521 area.
Cherney is chief market analyst for Standard & Poor's