Reversal in Store?
By Paul Cherney
This is the week of the Triple Witch.
Tuesday could easily see another day of losses. Earnings warning season is upon us, and there are few reasons for money managers to become overly aggressive in their buying.
I do not really have enough techncial evidence to call for a severe drop in prices, therefore I do not expect one.
On Tuesday, a lower close is possible, but there is a chart pattern which I have seen associated with the current configuration of indicators which suggests that an intraday drop to the Nasdaq 2152-2136 area could prompt buyers to move in. The only problem is that the upside is probably only going to be the product of bears covering open short positions, and their buying demand usually does not last very long unless there is a fundmental headline of undeniably bullish importance.
This is Triple Witch Week and if Tuesday is lower, Wednesday could be higher and vice versa.
The Nasdaq has immediate (intraday) resistance in the 2178-2189 area. then 2194-2221 then 2233-2253, resistance becomes thick in the 2263-2282 area.
The Nasdaq has a band of support 2167-2101, within this layer is a focus of support 2167-2150. Monday's intraday low was 2150.75. There is an additional shelf of support 2152-2136. If the Nasdaq prints in the 2142-2136 area, (without a headline of bearish impact), then prices should attract buyers. I still do not expect the 2100 level to be tested.
The S&P 500 has immediate resistance in the 1270-1287 area. The index is testing a band of support in the 1265-1245. After reviewing intraday charts I think it would be more appropriate to recognize support all the way down to 1239.
Cherney is Market Analyst for Standard & Poor's