By Paul Cherney
Volume measures deteriorated in Thursday's session, especially for the NYSE. This has increased the chances that more downside can unfold, especially in the sectors most hurt in Thursday's action like oil-related shares and basic materials stocks (although these sectors are also due for an oversold reflex lift). NYSE volume measures have weakened to a negative bias. Nasdaq volume measures are neutral; they have weakened, but they have not deteriorated enough to be labeled as having a negative bias.
Upside appears limited and a struggle. The intermediate trend is down, and the attempts at a counter-rally have failed repeatedly at key resistance levels, but short-term downside also appears to have limits based on considerable chart supports.
S&P 500 support is considerable (strong) at 1,160-1,136. Additional support is 1,142-1,102. A test of the 1,142-1,132 area would probably still produce a short-term rebound.
The Nasdaq has considerable support 1,959-1889.
A decline in prices might only generate descents into the support layers and prices might just meander sideways waiting for buyers to regroup. The chart support is extensive and sometimes markets can move lower as money moves out of certain groups (today we saw the exodus from energy and basic materials, but that has been going on since the beginning of March). Some of that money is going to be looking for a home and maybe some traditionally defensive areas like health care and utilities and consumer staples can take up the slack. Even money moving into tech can offer some limitations to the downside. Some of the selling on Thursday was rumored to be hedge fund related, as funds tried to meet margin calls in the wake of botched credit hedges related to the auto stocks. This is a short-term influence on prices, but certainly, for now, it is a negative.
Key short-term resistance levels remain S&P 500 1,178-1,184.70, Nasdaq 1,970-1,981.45.
It would take an S&P 500 close above key resistance at 1,178-1,184.70 to force prices higher. It would take a Nasdaq close above 1,981.45. In Thursday's session, the Nasdaq briefly printed above 1,981.45 at 1,982.20 and reversed immediately.
The S&P 500 has immediate intraday resistance 1,166-1,173.30 and then a key resistance level at 1,178-1,184.70. Next resistance is 1,198-1,215. In this area, resistance gets thick with prints of 1,205 and higher.
The Nasdaq has key resistance 1,970-1,981.45. On the daily chart, resistance for the Nasdaq is 1,968-2,021.82, but inside this resistance there is an especially well-defined (strong) layer of resistance at 1,989-2,007.24.
Once resistance levels are exceeded, they convert to support until proven otherwise. Once support levels are undercut they convert to resistance.
Immediate intraday support for the Nasdaq is 1,960-1,943.89, intraday support is thick at 1,959-1,947.
Immediate intraday support for the S&P 500 is 1,160-1,154, then 1,142-1,132.
Cherney is president of Cherney Market Analysis