By Paul Cherney
Right now, there is a balance between buyers and sellers and a lack of volume that suggests that neither bulls nor bears can muster sufficient legions to force prices one way or the other.
Thursday night's (June 10) overnight systems run produced two minor signals with negative implications. NYSE and Nasdaq volume measures and NYSE breadth measures suggest sideways, with a negative bias, short-term downside risk of a 1.6% to a 2.3% closing loss for the S&P 500 by the close on Monday June 21. But, Tuesday's overnight systems run produced measures for both volume and breadth which raise questions as to the legitimacy of concerns for S&P 500 closes in the 1,118-1,110 area by Monday (June 21).
Tuesday's rebound was strong enough to cause a halt in the descent of measures of volume and breadth which I use as secondary indicators to confirm or contradict the signals generated by Thursday's overnight systems run. The halt in the downside momentum of breadth and volume measures has created a dissimilarity between current market conditions and measures in the wake of the April 12, 2004, and January 27, 2004, signals. Chart evidence that I was wrong about short-term downside risk would be delivered by the markets if the S&P 500 can close above 1,142.18 and/or the Nasdaq manages to close above 2,023.
The CBOE volatility index, or VXO, is below its 10-day exponential moving average and as long as this is the case, downside is probably limited. Near the close on Wednesday, the 10-day exponential moving average of the VXO was 15.32.
The shelves of price action established mid-day on Wednesday, June 9, 2004 represent the most important short-term resistance levels. Those mid-day shelves are Nasdaq 2,001-2,006.79, S&P 500 1,134.34-1,136.53. In Tuesday's (June 15) session, the S&P 500 managed to spend some time above 1,136.53 with an intraday high of 1,137.36, so that now becomes the upper edge of immediate intraday resistance: 1,134.34-1,137.36.
S&P 500 support is 1,129-1,009.91, with a concentration of price action at 1,125-1,113. Next support: 1,102.77 to 1,078, with a focus 1,097-1,085.
Nasdaq immediate support is 1,996-1,982.41.
Cherney is chief market analyst for Standard & Poor's