By Paul Cherney
Note: Paul Cherney will be on vacation Thursday, Dec. 23 through Monday, Dec. 27. His column will return Tuesday, Dec. 28.
Nothing much has changed (technically). Longer-term measures of momentum of price and volume remain at levels that usually mean retracements are shallow in depth and short in duration, these measures have weakened but remain above thresholds that would increase the chances (in my opinion) of lower prices.
We are entering the last few trading days of the year when thin trading volume means just a handful of like-minded traders or institutions can force prices in one direction or the other.
The net change in the S&P 500 and the Nasdaq during the last 5 trading days of the year tends to be positive. The price performance of the last 5 trading days of the years means taking the close on the last trade day of the year and comparing it to the close of the sixth trading day before the end of the year.
The S&P 500 has gained ground during this period of time 78% of the time 1958 through 2003. The Nasdaq has gained ground in the last five trading days of the year 92% of the time (1978 through 2003 data).
This year, the sixth trading day before the end of the year is Thursday, Dec. 23 (the markets are closed Friday, Dec. 24).
S&P 500 support at 1,195-1,185 is well-defined (strong) and I expect it to hold if tested again. This area should act like a platform for prices to move higher in the last five trading days of the year. S&P 500 support is stacked at 1,184-1,180.40, but I would start to doubt my expectations for strength into the end of the year if the S&P 500 had a close below 1,193.36 (regardless of the fact that the immediate support runs to 1,185).
The Nasdaq has supports at 2,143-2,132, then 2,130-2,122, stacked at 2,118-2,097.86 with support thickening at 2,113-2,105. I would start to think I was wrong about strength into the end of the year if the Nasdaq had a day where it closed below 2,124.00 (regardless of the fact that support runs to 2122).
S&P 500 intraday resistance is 1,204.39-1,209.26.
Nasdaq intraday resistance is 2,154-2,171.27.
The resistance the S&P 500 is testing is old, from July, 2001. The older the resistance, the less precise you can be, but here is the read from the 60-minute charts from July and August of 2001: Immediate shelf of resistance was 1,195-1,209.26, the next layer of resistance was 1,215-1,226.27.
Nasdaq resistance based on 60-minute charts from 2001 (old resistances are not as precise as recent chart action) is 2,153-2,181.05, then 2,202-2,264.48, and stacked/overlapped at 2,226-2,328.05, which creates a focus of resistance (strong) at 2,226-2,264.48.
The Nasdaq has an immediate focus of resistance at 2,161-2,171.
Stacked supports and/or stacked resistances mean that there are multiple price points that appeal to both buyers and sellers and sometimes prices can spend a lot of time just moving sideways.
Anytime resistance is exceeded it must be treated as support until broken. Anytime supports are broken they must be treated as resistance until exceeded.
Cherney is chief market analyst for Standard & Poor's