By Paul Cherney
On Friday, the March employment report will be delivered. Thursday is the day before that report. Sometimes, price action on the day before an employment report can be boringly sideways due to caution to commit ahead of the numbers. I think this is a likely case for this Thursday's session.
On Wednesday, there was a good oversold bounce, but the damage done over the past couple of weeks has created anxiety and doubt in the marketplace, and there is probably still an element that would like to exit some long positions on the bounce. But, the markets are so oversold that one day of a rebound is probably not enough to relieve the oversold conditions, so a struggle higher might unfold on Thursday.
No two markets are ever exactly the same, but after reviewing similar technical conditions in the past 8 years, I would start to doubt concerns about a failed rebound retracing and undercutting Wednesday's lows if either of the indexes had 2 closes above their respective 20 period exponential moving average. I do not expect this, but I also recognize that Friday's jobs report has the ability to impact markets, and if the impact this Friday is a positive for stock prices, there could be another rush to cover that delivers more than a day of gains. The 20-period exponential moving average for the S&P 500 is 1,187, For the Nasdaq index it is 2,019.
Total trading volume on Wednesday was good, and the ratio of up volume to down volume was short-term impressive.
The Nasdaq has a focus of support in the 1,971-1,954 area and even with a failed rebound, I would expect this area to support a retracement. The 1,971-1,954 focus of support is inside the broader immediate support of 1,981-1,900.
Immediate intraday support for the S&P 500 is 1,179-1,160.52. The S&P 500 has a concentration of support 1,169-1,163. If the index were to have a close under 1,160.52, in my opinion, that would open downside risk for a test of the next layer of support at 1,147-1,120, with a focus of support 1142-1131.
The Nasdaq has resistance at 1,986-2,008.63, stacked and well-defined at 2,006-2,017.66, making a focus of resistance 2,006-2,008.63. A close above 2,008.63 should force a wave of buying at the open on the following trade day. Nasdaq prints 2,016 through 2,027 are thick with resistance and the first move into this area (if there is a move into this area) is likely to be repelled unless it is accompanied by a headline that virtually everyone recognizes as bullish. Next resistances are 2,036-2,059 and 2,047-2,069.42, which makes the 2,047-2,059 area a focus of resistance. Additional resistances are directly over the 2,069 level at 2,078-2,093.68 and 2,101-2,111.43.
The S&P 500 has immediate resistance at 1,178.82-1,189.50, there is a particularly well-defined layer of resistance at 1,183.78-1,188.40 (generated ahead of the FOMC announcement on Tuesday, Mar. 22). Next resistances are 1,190-1,194.84, then 1,199-1,210, resistance gets thick 1,204-1,210.54. There is broad resistance at 1,206-1,229.11, which has a focus of resistance at 1,213-1,219. Above 1,229, the next layer of resistance is 1,240-1,286, with a focus at 1,246-1,261.
Cherney is chief market analyst for Standard & Poor's