Nasdaq Overdue for a Consolidation

The Nasdaq is in a natural spot for the advance to stall -- and for some short-term profit-taking to take place

By Paul Cherney

The trend (for the next 4 to 7 trade days) for the Nasdaq and the S&P 500 remains tilted in favor of higher prices, but...

Late session volume measures on the Nasdaq raise doubts as to whether the index can rise authoritatively on Monday. The market is overdue for consolidation and the first couple of trade days after an expiration are a natural spot for some backing and filling.

The Nasdaq has had its second close within an area on the chart (2760-2916) that looks like a natural spot for the advance to stall and see some consolidation and short-term profit-taking. If the index just continues to power higher and closes sharply higher on Monday, I would have to interpret that as very bullish.

Immediate Nasdaq support is 2748-2714 with a focus of support 2748-2734. Additional support is 2698-2661 then 2646-2604. The Nasdaq has substantial support 2646-2576. A worst case scenario for a retracement looks like prints of 2646-2604.

Within the large band of Nasdaq resistance (2760-2916) there is a focus of resistance: 2775-2812, Friday's gap higher has extended this focus of resistance to include prints all the way up to 2841.

The S&P 500 is testing resistance in the 1339-1347 area and is also due for some consolidation. The next layer of resistance is considerable in the 1351-1389 area.

Immediate S&P 500 support is 1334-1311 which is stacked on support 1312-1287.

Cherney is market analyst for Standard & Poor's

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