A Hazy Near-Term Outlook

Good earnings news from market bellwethers will improve the likelihood of an advance in prices

By Paul Cherney

Note: Paul Cherney will be on vacation Monday, Oct. 13. His column will return on Tuesday, Oct. 14.

There are no clear indications for the short-term in the indicators I use. Most of the short-term indicators are at fulcrum points and could start to move in either direction. These are short-term observations; they do not affect my intermediate term expectations for S&P 500 1,068 or higher, and Nasdaq potential for closes 1,988 or higher. Other technical conditions might emerge to negate these expectations, but for right now, I do not see anything to bring these expectations into question.

Good earnings news from market bellwethers will improve the likelihood of an advance in prices on any single day.

Immediate Nasdaq support is 1,902-1,877 with a focus at 1,892-1,888. Additional supports are stacked due to the nature of recent price action. Next support is 1,882-1,870, which makes the 1,882-1,877 area a focus. Another layer of support is 1,856-1,827.

The Nasdaq chart has a gap in prices which runs 1,864.54-1,842.55, in the event there is aggressive profit-taking and prices move into this gap (meaning print below 1,864.54), I would expect to see accumulation ultimately occurring, but there could be a little shakeout in the gap. There is no market law that says price gaps have to get filled.

Immediate Nasdaq chart resistance established intraday on Thursday is 1,915-1,931.

The Nasdaq has multiple levels of resistance which I think are a contributing factor to the seesaw price action. The immediate chart resistance for the Nasdaq runs 1,908-1,946.23. The thickest layers where stalls in an advance would be more likely are 1,908-1,913 and 1,925-1,937.

The S&P 500 has immediate support at 1,034-1,028 and 1,026-1,014, with a focus of support at 1,023-1,018. If the index were to print in this 1,023-1,018 area, I think buyers would move in.

S&P 500 resistance is 1,032.60-1,050, based on intraday price action from June, 2003. There is a focus of resistance at 1,035-1,041. The next resistance is big at 1,048-1,107, established in March, 2002. I have reviewed historical intraday charts and there is a small but strong layer of resistance at 1,047-1,050.11.

Eventually, there should be S&P 500 prints of 1,068-1,090, and studies I have done on the Nasdaq suggest good odds for closes in the 1,988-1,996 area before Dec. 8, 2003.

Here is a look at overhead resistance levels based on longer-term historical intraday charts:

The S&P 500 resistance above 1,050.11 is well-defined at 1,068-1,106, with thick, brick-wall style resistance at 1068-1090.

The Nasdaq has a huge wall of resistance at 1937-2098.74, which was established by price action in December, 2001, and January, 2002.

Inside this broad area of resistance there are three thick layers of resistance: 1,937-1,958.96, 1,979-2,011.25, and 2,042-2,073.

Cherney is chief market strategist for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal. LEARN MORE