Markets Won't Stay Fired up

Downside is limited but valuation concerns should keep some conservative money on the sidelines

By Paul Cherney

Friday is options expiration. Quite often, most of the sound and fury has already taken place before the expiration day. An opening surge in volume and a lift in prices might not find much in the way of followthrough.

At this time I don't think the markets can establish an advance which just keeps going and going without looking back because there are still too many valuation concerns which should keep some conservative money on the sidelines. The Fed has already made it's fifth rate cut, the historical records are clear; at the one year anniversary of a fifth rate cut, neither the NASDAQ nor the S&P 500 have ever closed lower than they were on the day of that fifth rate cut, so with a one year time horizon, the downside is limited, too.

Immediate support for the NASDAQ is now 2171-2156 then 2125-2109. The NASDAQ has established a well-defined wall of resistance in the 2187-2233 area. This is part of the broader band of resistance in the 2174-2233 area. The next layer of resistance above 2233 is directly overhead in the 2242-2356 with a focus of resistance 2253-2310. Unless there is a headline of undeniably bullish importance, I think that the best the NASDAQ can do on this short-term advance (the next couple of trade days) is a print at or above the 2233 level. Downside is limited.

The S&P 500 has immediate closing support in the 1273-1253 area. There is a small shelf of resistance in the 1288 area, which is where the index closed on Thursday. The next substantial resistance does not occur until 1300-1341. A likely spot (short-term) for this initial leg up to run out of momentum is prints in the 1311-1339 area.

Cherney is Market Analyst for Standard & Poor's

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