By Paul Cherney
Tuesday's price action was a good short-term improvement, but it would have been better to see more volume as an indication that cautious long-term investors were rushing in from the sidelines.
There has been improving volume, but some portion of Tuesday's buying was bears covering shorts and their buying interest is short-term in nature so if prices edge higher on Wednesday but the NYSE volume is 1.5 billion or lower, I would be casting a suspicious eye on the action.
There is a short-term positive bias in place and I would expect to see prices push higher on Wednesday, but the markets need to produce a day of good gains on better volume.
Right now, prices remain in the trading range until proven otherwise.
Due to the price high of April 8, 2005 of 2021.82, I will define the Nasdaq trading range as 1,968 to 2,021.82. The Nasdaq needs to close above the 2,021.82 level while generating impressive volume. There is positive short-term momentum in place so there should be a test of higher ground. On the downside, if the Nasdaq closes under the 1,968 level (not expected right now) that could trigger a day of selling.
The S&P 500 trading range is 1,193.28-1,163.69. A close above 1,993.28 on good volume should push prices a little higher, but it will take impressive volume to suggest a trend higher of more than a day or two. Immediate resistance for the S&P 500 (above 1,990-1,993.28) is 1,997-1,929.11. Resistance gets thick at 1,199-1,219.
Immediate support for the S&P 500 starts at 1,186 but becomes well-defined at 1,185-1,181. A strong market attracts buyers above supports. A strong market is propelled higher by market participants who want to buy stock at whatever price it is trading; they do not wait for a "bargain." S&P 500 support under 1,163 is 1,147-1,120, inside 1,147-1,120 there is a focus of support 1,142-1,131.
The Nasdaq has resistance at 2,006-2,008 and 2,006-2,014.31, then 2,017-2,027; resistance in this area thickens with prints of 2,023.00 and higher. Additional resistance is 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.
These markets have to prove themselves by delivering convincing volume on advances. Anytime resistances are exceeded they become supports until proven otherwise.
Cherney is chief market analyst for Standard & Poor's