By Paul Cherney
There should be sufficient support under current levels to stop a decline, but there has been no convincing evidence that buyers are ready to take control of the markets.
A real gap opening lower on Friday morning would represent a shakeout and might help eliminate some more of the potential fence-sitting sellers who create resistance when prices rise.
On a purely technical basis, a huge drop in prices does not seem likely due to the recent stairstep advance, but a probe lower seems likely.
Immediate intraday support for the S&P 500 is 1,008-983. Support begins to get thick with prints of 1,005 and lower and any prints under 998 should attract some bears covering short positions. Some sort of a "W" bottom might have to form which means that even if there is a little shakeout which leads to a rebound in prices, the lift could run out of momentum and retrace to establish a "W".
Immediate intraday resistance for the S&P 500 is 1,014-1,026, with a focus at 1,018-1,023.
Immediate intraday resistance for the Nasdaq starts at prints of 1,831, and higher, but the well-defined resistance is 1,842-1,871.19 with a focus at 1,845-1,856.12.
The Nasdaq finished Thursday below critical support at 1,835-1,819. This could be a set-up for a shakeout which sees prices test the next layer of support 1,807-1,770.
More choppy trading is likely, but all of the sideways trading range price action experienced in June, July, and August represents huge support for prices, so far, though, the buyers have not made their presence known in a dominant fashion.
Cherney is chief market analyst for Standard & Poor's