A Tough Call

Can the markets build on the huge advance since Apr. 4? Thursday's action may provide some clues

By Paul Cherney

I think the chances are pretty good that we saw some sort of bottom established last week and that bottom could produce net gains for couple of weeks, but the next three to five trade days could easily see choppy trading as shorter-term traders book profits and wait for a correction before recommitting to the longside.

Thursday is a tough day to call, but it could offer some valuable insight into the composition of the buying and the ability of the markets to build on the huge advance seen since Wednesday's lows (Wednesday a week ago, 4/4/01). Thursday should be a relatively low volume day as position traders and day traders jockey for exit points by about 1:30 pm ET.

BUT, if we see good volume and an advance in prices, it would be a sign that longer-term investors are willing to dedicate some funds to the market and that is a necessary ingredient for a trend. Without long-term investors convinced that there is upside to the market, it is virutally impossible for markets to trend for more than just a few days.

Thursday has the added burden of being the last trading ahead of a three day weekend and the gains seen in the past five trade days remain ripe for profit-taking. From Wednesday's (4/4/01) intraday low of 1619.58 to today's intraday high of 1948.08 the Nasdaq has gained 20% and there has to be some sort of a consolidation of those gains.

The Nasdaq has considerable resistance in the 1871-1979 area. Immediate (intraday) resistance has been established in the 1911-1938 with a focus 1920-1925. Pure chartists will look for, and even expect to see a Nasdaq retracement which retests the 1815-1785 area.

Immediate Nasdaq support is 1868-1839 with overlapping support 1855-1794 which makes the 1855-1839 area an important layer of prices.

Major S&P 500 resistance remains 1171-1184. Immediate support is 1150-1142.

Cherney is Market Analyst for Standard & Poor's