By Paul Cherney
This is a tale of two markets. The Nasdaq has been holding its own, on a price-only basis it has a positive bias, but the S&P 500 is being hurt by the mass exodus from energy related stocks, materials, and on Friday even utilities suffered.
Volume measures for the NYSE are negative, but in the short-run, the exodus from energy and materials stocks appears to be running out of sellers. For Monday (especially after a down Friday), there could be some early weakness; I think it would be better to see early weakness as long as the S&P 500 does not undercut 1,147-1,139.33 for more than 4 minutes. I don't think prices will get that low (to undercut 1,139) but I would prefer to see opening downside as a sign that fence-sitting sellers have given up.
• Immediate intraday support for the Nasdaq is 1,963-1,954.92;
• Immediate intraday support for the S&P 500 is 1,147-1,139.33.
If there is early weakness on Monday, it would take a rebound above the most immediate intraday resistance levels to tilt the odds for some upside.
• Immediate intraday resistance for the Nasdaq is 1,980-1,985.30;
• Immediate intraday resistance for the S&P 500 is 1,159-1,163.75.
The levels mentioned above have bigger importance only if we can see a decline in prices during the first 30-60 minutes of Monday's session. If the markets just head higher at the open and there is no probe lower, then there is the distinct possibility that we can see price action similar to Friday's. A roller coaster of price and emotion.
I think it would be a positive sign to see the VXO move under 15.30 (chart read and not particularly likely on Monday).
Nasdaq daily volume measures are neutral but there has been enough strength in the ratio of up volume versus down volume to suggest that a day or two of lower prices won't necessarily attract big follow-through lower. I want to caution readers that even though I don't think the Nasdaq can generate significant follow-through lower in the short-run, the Nasdaq's end of day and weekly volume measures are not outright positive, they simply have not tripped short-term negative thresholds the way the NYSE's volume measures have.
Emotions are highly charged in these markets and intraday reversals of fortune have been virtually daily occurrences. Next week is options expiration week which brings its own brand of potential volatility, sometimes on Tuesday and Wednesday.
The intermediate trend for prices remains 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.
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 Friday's session, the Nasdaq spent some time above 1,981.45, but the index tested the next layer of resistance at 1,989-2,007.24 and sellers became aggressive.
The S&P 500 has now confirmed that there is a formidable wall of resistance at 1,166-1,173.30. Key resistance is at 1,178-1,184.70. The next resistance above that is 1,198-1,215. In this area, resistance gets thick with prints 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. In Friday's session the Nasdaq printed an intraday high of 1,990.00 and then rolled over. This confirms the strength of this layer of resistance.
Once resistance levels are exceeded, they convert to support until proven otherwise. Once support levels are undercut they convert to resistance.
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 produce a short-term rebound.
The Nasdaq has considerable support 1,959-1,889.
There is a layer of Nasdaq 1,960-1,943.89.
Immediate focuses of support for the S&P 500 include 1,160-1,154, then 1,142-1,132.
Cherney is president of Cherney Market Analysis