By Paul Cherney
The strength demonstrated by price and volume momentum in the lift from the lows on Thursday, July 7, usually has a lingering positive effect, but the first part of that potentially positive effect could start to weaken on Friday, July 15. Profit-taking pressures appear to be building. I think it is better to have patience and wait through any brief flatness or small retracement as long as immediate supports are not undercut.
Immediate supports of significance are: Nasdaq, 2128-2115.57; S&P 500 1222-1212.11.
Thursday's price action had big potential in the morning, but significant, bullish followthrough was non-existent. I do not know how much of Thursday's price action was due to Friday's options expiration, but I do not like to see markets open strongly and then fade the rest of the day. For right now, the reality is that higher prices made sellers more aggressive than buyers (if that hadn't been the case, then the markets would have finished the day above the levels achieved in the first 10-minutes of trading; they didn't).
Over the past few days I have included a window of time in which I expected a positive tone to dominate, the shortest period of that window ends on Friday (tomorrow), now, in the short-term the markets will become more susceptible to a retracement. The markets spent too much volume maintaining small advances on Thursday. Friday might see more of the same.
Next week, after the July expirations, is when my concerns about a lack of attendance start to rise. Earnings reports should keep interest in place until Friday, July 22, or even a few trading days after that, but summer vacations are coming in August and I am concerned that once the bulk of earnings are out of the way, markets might not be able to push much higher than the levels established tomorrow or sometime next week.
Immediate Intraday Resistance (established Thursday, July 14):
• S&P 500 1223.1229.12-1233.16.
• Nasdaq 2156-2164.18
Immediate Intraday Supports:
• Nasdaq support: 2149-1236.37, stacked at 2137-2124.88.
• S&P 500 has immediate intraday support at 1224-1219.80, then 1220-1214.69
• The Nasdaq has a focus of resistance 2150-2154, this is an overlap of two layers of resistance 2134-2154 and 2150-2165, I had been making the supposition that a gap above 2154 at the open would open the door for a bullish trip to the 2170.99-2192 layer of resistance, that is still possible, but as Thursday's trading unfolded it became obvious that sellers, not buyers were becoming aggressive and that could mean some sort of a stall or retracement might have to unfold before a foray higher.
• S&P 500 has immediate intraday resistance 1224-1229.11. The index also followed the short-term bullish scenario I had outlined here (an opening lift that pushed prices past the 1229.11 in the first few minutes of trading), but the index could not finish with a close over 1229.11. A close above 1229.11 would be a short-term bullish move, next resistance is from all the way back in the spring of 2001 at 1232-1286.62 with a focus of resistance 1249.23-1267.
Supports Of Significance: Nasdaq 2128-2115.57, S&P 500 1222-1212.11.
• Nasdaq support at 2137-2124.88 overlaps the support of significance, so 2124.88-2115.57 is a focus of support. Next support is 2106-2085.
• S&P 500 has stacked supports at 1222-1212.11, then 1210.49-1199.03; usually, prices have a difficult time pushing down through stacked supports.
Cherney is president of Cherney Market Analysis