Trend Continues for Higher Prices

Monday's session saw some orderly profit-taking. The market is consolidating -- and that's healthy

By Paul Cherney

The trend (for the next 3 to 6 trade days) for the Nasdaq and the S&P 500 remains tilted in favor of higher prices.

Monday's market was a session of orderly profit-taking.

This market is consolidating. This is healthy.

Sometimes you can see an excess of selling which the markets recognize as "overdone" before prices reverse and move higher. I wouldn't be surprised to see some downside on Tuesday or Wednesday, but I interpret Monday's price action as subtle confirmation that there is more on the upside to come.

Greenspan testifies in front of the Senate Banking Committee on Thursday (at around 10:00 a.m. EST) and there could be some hesitation in front of that event. If Greenspan hints that an aggressive Fed tightening will probably be announced on Jan. 31 then the markets will probably discount that move on Thursday and Friday and by the time Wednesday's announcment comes, it could very easily become a "sell on the news" event.

Immediate Nasdaq support is 2748-2714 with a focus of support 2744-2731. 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 (which looks doubtful after Monday's performance).

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. 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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