Back in the Trading Range

Neither buyers nor sellers can generate conviction that lasts for more than two days in either direction

By Paul Cherney

The markets have established short-term trading ranges again because neither buyers nor sellers can generate conviction that lasts for more than two days in either direction. The markets are waiting for a headline to spur action. Earnings reports, advance first-quarter GDP (due on Thursday, Apr. 28), and the path for oil prices all offer potential headlines to inspire the markets.

The new trading ranges are 1,904.27-1,962.41 for the Nasdaq index and 1,136.22-1,964.80 for the S&P 500 index.

The Nasdaq would have to close above Tuesday's intraday high of 1,958.58 and the S&P 500 would need to close above 1,164.80 just to start to bolster confidence that short-term sellers have been satisfied. There is an additional problem, though. At or above Tuesday's intraday highs is another band of resistance created by the former trading ranges that broke during the week ending Apr. 15. The former trading range (representing resistance) for the S&P 500 is 1,163-1,193.28. Prints of 1,167 and higher are thick with resistance. The Nasdaq's former trading range resistance is 1,968-2,021.82. There is a layer of thick resistance at 1,972-1,985.

Immediate intraday resistance is a thin shelf at 1,927.44-1,937.15 for the Nasdaq and 1,154.02-1,159.87 for the S&P 500. But both of these levels are at the beginning of or just under more considerable resistances from Tuesday and Monday. Those resistances are Nasdaq 1,938-1,958.58, with especially think resistance at 1,944-1,953, and S&P 500 1,157-1,164.80, with especially thick resistance 1159 and higher.

S&P 500 support is 1,152-1,136.22. The index also has support in the 1,147-1,120 area with a focus of support at 1,142-1,131, but a move below 1,136.22 would represent a new low for the current weakness.

Immediate Nasdaq support is 1,928-1,912. Wednesday's intraday low was 1,913.14 and this confirms the support at 1,912 and makes it more important that if there is an intraday decline, that it does not undercut this level or a wave of selling could follow. In a longer-term view of the chart, the Nasdaq has two layers of support that were established in September and October of 2004: 1,971-1,899.33 and 1,925.85-1,852.59. The overlap is 1,925.85-1,899.33 and this still represents very strong support, but if the recent low print of 1,904.27 is undercut for more than a few minutes without attracting buyers, then followthrough lower might cause a capitulation of selling that forces Nasdaq prices under 1,889 in search of buyers.

Cherney is chief market analyst for Standard & Poor's

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