A Rebound in the Cards?

Odds remain stacked for some equity weakness, but that should be followed by another lift in prices

By Paul Cherney

Mixed indicators. There was enough improvement in the intraday indicators (60-minute bars) on Wednesday, Feb. 26, to raise questions as to whether there will be another day of lower prices. In looking at end-of-day indicators, the odds remain stacked to expect some weakness, but that should be followed by another lift in prices which should represent another short-term trend.

Immediate Nasdaq support is 2,014-2,005, and the bigger band established over the months of October, November and December, 2003, of 2,007-1,959; there is a focus of support at 2,001-1,996. Next support is 1,980-1,959. I now think I was wrong to expect Nasdaq prints 1,982-1,970 -- the low pass was 1,991.

Immediate support for the S&P 500 is 1,148-1,136.66. The index has printed below 1,136.66 for more than four minutes and that has opened downside risk for prints of 1,129-1,124, but it is starting to look doubtful that the index can move lower in the short-run.

Nasdaq immediate chart resistance is 2,026-2,051, overlapping at 2,049-2,062.48, then 2,072-2,094.92. This resistance actually goes all the way to 2,102; there is a focus of resistance at 2,072-2,091. Next resistance above 2,102 is 2,108-2,153.83.

Chart resistance for the S&P 500 is a small shelf at 1,144-1,149. Resistance is stacked at 1,149-1,176.97, with a layer of resistance at 1,155-1,158.89.

I think upside will be a struggle for the next couple of trading days. Volume has been unimpressive.

The CBOE volatility index, or VXO, is back below its 10-day exponential moving average, which I interpret as a background positive for prices. Here's a reminder: the VXO measures implied volatility, and the lower the number, the smaller the expectations for price moves. Low volatility means lackluster, anemic price moves.

Cherney is chief market analyst for Standard & Poor's

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