By Paul Cherney
On Wednesday, when the crude oil contract moved above the $61.00 level, equity-market sellers became aggressive. One of the peculiar aspects of Wednesday's market was that oil-related shares moved lower, as if traders used the historic highs in the front month crude contract as a sell on the news event to take profits.
Obviously, the markets have trouble ignoring oil prices above $61.00 and if oil prices remain above this level, I think it is unlikely that stock prices will be able to advance. My take on the psychology in place right now is that higher prices will hurt equities, but hope that second-quarter earnings will act as source of price salvation and that should keep prices from dropping dramatically unless crude forges new highs.
Right now, the price patterns for the S&P 500 are similar to the patterns in place for the 5-7 trade days starting January 5, 2005, but volume measures were markedly more negative at that time, those same volume measures are not at levels similar to January, so a search for equity market price stability could see a rebound if oil prices decline.
Thursday is the day before the June employment report and very often, prices can see little movement as as big money hedges itself ahead of Friday's report.
On a short-term intraday basis: if the Nasdaq starts to print below 2066.45, a move to 2058 would be expected.
• Immediate Nasdaq support is 2076-2066, then 2060-2052.10.
• The S&P 500 has extensive sideways supports which makes it unlikely that the index will show a dramatic decline.
• The S&P 500 has support at 1194-1185.19.
Immediate Intraday Resistances:
• The Nasdaq has immediate intraday resistance at 2074.30-2085.04, with a focus of resistance 2079-2085.04. On Wednesday, even before oil prices moved above $61.00, the Nasdaq could only manage an intraday high print of 2084.76, and that event confirms the strength of this short-term intraday resistance level. Next intraday resistance is 2089-2112 with a thick layer at 2089-2095.
• Immediate intraday resistance for the S&P 500 is 1199.03-1203.50, then 1206-1208.84. Prints above 1208.84 for more than 4 minutes opens the upside for tests of 1212.00-1219.10.
Cherney is president of Cherney Market Analysis