Turnaround Thursday?

Thursday's session could see a shakeout of sellers -- creating the potential for a reversal and an advance on the day

By Paul Cherney

I do not have anything (technically) which suggests that the market is ready to make a reversal which just trends higher and higher, but the odds have increased (due to extremely oversold short-term conditions) that Thursday could see a shakeout of weak hands in the morning and with those sellers out of the way a certain amount of resistance to advance will have been eliminated which creates the potential for a reversal and an advance on the day.

Nasdaq price prints near 2052 could occur, this price level could be exceeded briefly on the downside and then a reversal could easily follow.

Caution ahead of the earnings warning season (which usually starts after the second week of June) will probably prevent any rebounds from garnering convincing, uninterrupted follow-through.

The Nasdaq is in the lower edge of a band of support in the 2233-2052, I am expecting that prices can test, even undercut 2052 on an intraday basis, but that a move to this area will cause short-sellers to start to buy to cover and this could create the atmosphere an intraday reversal and even gains on the day. The next layer of support is 2030-1972. Immediate resistance is 2163-2207 then 2233-2283.

The S&P 500 has immediate resistance 1253-1295 with a focus 1265-1283. The next layer of support is 1242-1207.

Cherney is Market Analyst for Standard & Poor's