By Paul Cherney
On a pure chart read, the Nasdaq has broken out of its trading range. Chartists like to take the high of the trading range minus the low of the trading range and add it to the breakout point for an upside target. When I look at the charts there are potentially two different lows which could be used: the lows from the end of June (Nasdaq 1,598) or the most recent lows in the beginning of August (Nasdaq 1,640). I calculated an upside target for the Nasdaq using each of the lows and those targets are 1,912 and 1,954.
While I have little doubt that at some point the Nasdaq will be printing back above 1,912, the index does have a pretty thick layer of resistance which will probably cause a stall in the current advance. Chart resistance for the Nasdaq is from March, 2002, and it is well defined: 1,845-1,946, with a thick shelf at 1,846-1,873. Resistance becomes especially cluttered with prints of 1,933 and higher because not only is there resistance from March, 2002, there is also the beginning of resistance dating back to June and July of 2001.
S&P 500 resistance (daily bar charts) was established by price action in June, 2002; it is 1,008-1,041, with a focus at 1020-1031. The next resistance is big at 1,048-1,107, from March, 2002.
Prior resistance levels are now support.
Immediate support for the S&P 500 is 1,015-988 with a focus at 1,015-1,008.
Immediate support for the Nasdaq is 1830-1773, it becomes thick starting with prints of 1797-1778. Support runs all the way to 1737.
Another day of gains is likely for Wednesday.
Cherney is chief market analyst for Standard & Poor's