By Paul Cherney
Monday was a day of mixed intraday signals and higher oil prices, but one aspect of the day cannot be overlooked: There has been no breakdown in prices. I think the Nasdaq and the S&P 500 are at or near areas on the chart that mean limited upside and the potential for some profit-taking, but the market doesn't care what I think, and until there are some valid signs of broken support or some other blatantly bearish signal, a positive bias remains in place.
August is here. Earning reports will start to thin. The markets will start their search for the headlines to inspire buying in a vacation-thinned environment.
I would become concerned about a shift toward profit-taking if the Nasdaq posted a close under 2165.44. The index has a focus of support at 2167-2165.44. This area has been tested several times and has held, so it has become an important layer of support because these prices are where buyers have consistently bought the market and pushed it higher; if there is a Nasdaq close below this area, that would suggest to me that a shift in sentiment has occurred (because if prices closed below 2165.44, it would mean that people are no longer willing to take a long-sided chance at those levels.) For the S&P 500, I would become concerned about a shift in sentiment if the index posted a close below 1219.80.
Right now, I think the VXO volatility index has to move back below 10.56 to increase the likelihood of a scramble to the long-side.
Immediate Intraday Resistances:
• Nasdaq immediate resistance established in Friday's session is 2192.93-2201.39, in Monday's session, the Nasdaq managed to edge above the 2201.39 level, but those higher prices made sellers a little more aggressive than buyers, so now the immediate intraday resistance must be labeled 2193.93-2201.87 . Next intraday resistance is 2205.54-2264.58 with a distinct layer of resistance 2211-2249, focus 2211-2233.33. Please understand that the longer back in time you pull the prices for support or resistance, the less precise they are because the most immediate price action carries the most immediate importance. The prices I am using for resistance are based on intraday charts from May and June in 2001, a little more than 4 years ago.
• S&P 500 intraday resistance established on Friday and Thursday of this past week is 1240.90-1245.15. The next focus of resistance above 1245 is 1249.23-1267. This area looks like a natural stopping point to me, but the markets would have to break supports or issue some other technical evidence of weakness to suggest that this area was a short-term top. Prices can still move into this zone but I think some choppy, uncertain trading might be on the menu for this week.
Immediate Intraday Supports:
• Nasdaq support:2189-2182, 2175-2165.44 overlapped at 2167-2144.78.
• S&P 500 has immediate intraday support at 1239.04-1230, overlapped at 1231.79-1223.03, which creates a focus of support 1231.79-1230.00. Thin shelf 1219-1215, next meaningful support is 1206-1183.
• S&P 500 resistance is 1232-1286.62 with a focus of resistance 1249.23-1267.
• Nasdaq daily charts resistance above 2193.19 becomes thick 2263.75-2328.05.
Cherney is president of Cherney Market Analysis