By Paul Cherney
Measures of price momentum and volume are at neutral readings, offering no predictive value. These markets are waiting for a headline and maybe Friday's release of the February employment report will deliver something to push prices one way or the other. The Street expects nonfarm payrolls to have increased by 225,000 on the month.
If the Nasdaq moves and closes above 2,093.68, or the S&P 500 closes above 1,217.90, I would expect a short-term wave of buying (a short-term trend of maybe three to five trading days).
One of the factors that helped depress stock prices intraday on Thursday was the big jump in the price of April crude oil futures, which hit $55.20 near 12:25 p.m. ET. This was virtually simultaneous with the intraday lows for stock prices. I think a drop in crude oil futures on Friday would probably be a positive for stock prices.
Immediate resistance for the Nasdaq is substantial (many days) in the 2,068-2,111.43 area. There is a focus of resistance at 2,078-2,093.68.
For the S&P 500, immediate resistance is 1,212-1,217.90. Resistances are stacked and overlapped at 1,215-1,226.27, making the 1,215-1,217.90 area a focus of resistance. I expect any move above 1,217.90 to attract buyers. A close above 1,217.90 would open upside for a test of the 1,239-1,252 area.
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 prices can't make a break above 1,217.90 by Friday's close. If there is a retracement that undercuts the 1,184.16 that would be a short-term negative and I would expect a little followthrough 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, this area held prices in Monday's session (Monday, February 28, 2005 session intraday low was 2,038.77, Thursday's low print was 2,047.92 which is higher than 2,038.77.) What does that mean? That means that buyers were not willing to wait for a test of the previous swing low in the daily charts. I interpret that to mean that there are motivated buyers and that is a background positive, but it will be the nonfarm payrolls number that dictates the short-term trend in prices. A move below Nasdaq 2,038.77 that lasts more than 4 minutes would probably be a negative. If there were a move below 2,023.00 it would be a negative, too, meaning probably weaker prices to follow.
The 30-day exponential moving average of the VXO was 12.14 near the close of trading on Thursday. Usually, when the VXO is above its 30-day and putting distance between itself and its 30-day, stock prices are falling, but on Thursday, the VXO finished the session lower than Wednesday's close. The VXO is not expanding the distance between itself and its 30-day exponential moving average. My interpretation of the VXO chart is that it should be a positive for intraday price action if the VXO moves below 12.39, but it would be a bigger positive with a move under 12.17.
Immediate intraday resistances are S&P 500 1,213.08-1,215.79 and Nasdaq 2,057-2,074.71.
Bigger total 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.
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