By Paul Cherney
There are no clear signals in the intraday measures of price combined with volume.
Momentum measures based on end-of-day prices are neutral and weak.
CBOE put/call ratios near the end of the day were at levels which would suggest only limited downside.
The S&P 500 advanced 14.9% for the quarter. I looked at price action in the S&P 500 for the first 10 trading days after a quarter in which the index had advanced by at least 10%. The study was only short-term in nature, looking at whether prices were higher or lower as of the 10th trading day into the next quarter. Historically, 65% of the time, the S&P 500 will follow through with a price advance and be higher as of the close of the 10th trading day after a quarter in which it had gained 10%.
This is a reminder from before based on S&P 500 data back to 1957. I filtered for quarters which had a 10.0% or greater advance at the end of each quarter. There were 21 quarters that met this filter. I then filtered for the performance in the S&P 500 in the quarter following quarters which finished with 10% or greater gains. Seventeen of those 21 quarters were followed by another quarter of gains, so 81% of the time, the S&P 500 managed to post an additional gain in the following quarter. The four losing quarters which followed a quarter of 10.0%+ gains were the quarters ending 6/30/61 (down 0.65%), 9/30/75 (down 11.89%), 6/28/91 (down 1.08%), and 3/28/02 (down 0.06%).
The average of all gains plus losses in the quarters following 10% gaining quarters was a gain of 4.14%. With money market funds yielding under 1.0% for an entire year, this average of 4.14% for a quarter of a year is a compelling case for many to shift some assets back into equities.
In my next column I will have studies which look at the last two trading days before the July 4 holiday.
Resistance: The S&P 500 has immediate intraday resistance at 984-995 and 993-1003, which makes the 993-995 an especially thick area of resistance. Next resistance is 1010-1015.12. The bigger picture of resistance, which was established by price action in June, 2002, is that the S&P 500 has a band of resistance at 1008-1041 with a focus of 1020-1031.
The Nasdaq has immediate intraday resistance at 1641-1660.47 and 1658-1669, which makes the 1658-1660.47 area especially strong resistance.
Support: The Nasdaq has support at 1619-1599.39, then 1603-1584.
Immediate intraday support for the S&P 500 is 982-972. There is a broad band of support at 973-947.
Longer-term support for the S&P 500 is 948-927, for the Nasdaq, 1558-1478.
If the short-term, intraday supports start breaking, a price trip back to these longer-term supports is likely, but it would probably take a headline which everyone would recognize to be bearish to do it.
If the Nasdaq were to print below the 1621 level, the next layer of support looks good at 1618-1599.39.
If the S&P 500 were to undercut Monday's intraday low of 973.60, there is support right underneath this which is 973-947 with a layer of support at 973-960. A print of 965.00 would represent a retest of the bullish breakout which occurred at the end of May.
Cherney is chief market analyst for Standard & Poor's