By Paul Cherney
During Presidential election years, the Greenspan Fed has demonstrated a tendency to refrain from making moves in rates the closer the time gets to the election. The latest move higher in rates by the Greenspan Fed ahead of a presidential election occurred in 1988 when the Fed raised the target on August 9.
The latest move by the Greenspan Fed during the months leading to a presidential election (either way, up or down, in the Fed Funds target) occurred during the 1992 election when the Fed lowered the target on September 4.
There is a gap in the Nasdaq chart that was created by the lower opening on Friday, August 6, 2004. The Nasdaq gap runs 1,806.28-1,820.21. Sometimes gaps like this can act like a magnet for prices, but once they are filled, they can represent a sell-point for shorter term traders.
On Wednesday, if there is opening strength and the price gap in the Nasdaq is filled, I would expect to see some profit-taking. The day after FOMC announcement can move opposite the close on the day of the announcement.
As I've mentioned before, when I see the deep levels of negativity I saw during Friday's session, I expect two things to happen: 1) an oversold bounce on the following trade day (I was wrong about Monday, there wasn't much of a bounce, but Tuesday's price action was a bounce); and 2) the bounce fails to attract sufficient follow-through buying (no initiation of a trend higher), and then, over the next few trade days (sometimes even longer than just a few trade days), prices have to have a close lower than Friday's closes and there might have to be an extended period of basing sometimes with a negative bias.
Immediate intraday support for the S&P 500 is 1,072-1,066. Immediate S&P 500 support is 1,063-1,031 with a focus of support 1,060-1,046.
The Nasdaq's intraday support is 1,795-1,782. Next support -- long-term support -- is 1,776-1,600, with a focus at 1,745-1,675.
Immediate resistance for the S&P 500 is 1,086-1,092, then 1,103-1,109.30 and 1,114-1,119.60, stacked and overlapped at 1,118.56-1,122.37.
Immediate resistance for the Nasdaq is now the price gap which remains unfilled from Tuesday's intraday high of 1,808.42 to 1,820.21; the next substantial resistances are 1,831-1,843.05, 1,848-1,864, and 1,874-1,880.81.
Any time resistances are exceeded they must be treated as supports until proven otherwise. Any time supports are undercut they must be treated as resistance until proven otherwise.
Cherney is chief market analyst for Standard & Poor's