By Paul Cherney
The biggest problem I have had with the current markets is that even though they make moves in one direction or the other (daily bar charts), the movements never force my measures to absolutely negative or absolutely positive readings (all I get are biases). I think the price action speaks for itself, there has not been a big trend with break-away volume in the daily bars.
I do not have definitive readings to tilt the scales in either direction right now. I usually expect to see sideways and a drift lower under conditions like this. But if the Nasdaq moves above 2,093.68, or the S&P 500 moves above 1,217.90, I would expect a short-term wave of buying. If the buying can generate good up volume versus down volume ratios, then something more to the upside would be expected.
These markets probably need a bullish headline to propel prices signficantly higher. Both the Nasdaq and the S&P 500 are right at significant resistance levels and prices might have to re-group at lower levels before a successful assault can take place.
End-of-day momentum measures are neutral, offering no insight as to direction of price.
Immediate resistance for the Nasdaq is substantial (many days): 2,068-2,111.43 with a focus at 2,078-2,093.68.
One of the big problems with the Nasdaq's attempts to move higher (Feb. 15 and 16, and Feb. 7 and 8) was that while price had moved higher, there was no technical evidence of a stampede of aggressive buyers. The current short-term lift might suffer the same fate (failure to follow through) so, I will need to see a day or two when up volume swamps down volume to suggest that this lift is something more than just an energetic lift fueled by short-covering and short-term momentum players. Bigger volume would increase the chances that investors, whose time horizons are greater than "intraday" or just "a few trade days," have taken an interest in putting money to work on the long side.
For the S&P 500, immediate resistance is 1212-1217.90. Resistances are stacked and overlapped at 1215-1226.27 making the 1215-1217.90 area a focus of resistance.
The S&P 500 has immediate support at 1,206-1,197. Next support is 1,190-1,184.16 and at least one close inside this area looks likely. If there is a retracement that undercuts the 1,184.16 that would be a short-term negative and I would expect a little follow-through lower. S&P 500 1,184.16 was the low and close on Tuesday, Feb. 22. On the daily charts there is S&P 500 support at 1,184-1,160, inside this support are shelves. The biggest support looks like 1,178-1,163. Next support is 1,142-1,090.
The Nasdaq has immediate support at 2,055-2,036 and 2,038-2,023. There is a layer of thick support at 2,047-2,036 that held prices in Monday's session (session intraday low was 2,038.77). A move below 2,038.77 that lasts more than 4 minutes would probably be a negative. If there were a move below 2023.00 it would be a negative, too, meaning probably weaker prices to follow.
The 30-day exponential moving average of the VXO was 12.09 near the close of trade on Monday, Feb. 28. VXO prints above this level would probably coincide with negative price action in equities.
Anytime supports are undercut they convert to resistance until broken. Anytime resistances are exceeded, they convert to supports until proven otherwise.
Cherney is chief market analyst for Standard & Poor's