Negative Bias in Place

Prices are being held hostage by the next earnings announcement (good or bad)

By Paul Cherney

Market sentiment is in a fragile state and prices are being held hostage by the next earnings announcement (good or bad).

There are few money managers who will be aggressively putting money into the market until they see some fundamental concerns addressed, especially earnings and the "earnings visibility," we keep hearing.

In Tuesday's overnight systems run I had an indicator trip which is usually followed by an up day (that would have been Wednesday). This indicator failed in Wednesday's session (the signal from Tuesday night proved to be wrong). In reviewing price performance in the wake of a failure of this indicator I now have to expect a negative bias with sideways or (more likely) lower prices on Thursday by the close. That is the technical condition (right or wrong).

The Nasdaq has immediate (intraday) resistance in the 2136-2189 area with a focus 2156-2183. There is also a small shelf of resistance in the 2136-2147 area. The next resistance (above 2189 is 2194-2221 then 2233-2253, resistance becomes thick in the 2263-2282 area.

The Nasdaq has a band of support 2167-2101, Tuesday's intraday low was 2105.26. The index ended Wednesday's session in a test of this area of support. If prices drop below 2100 without attracting buyers immediately (within 3 or 4 minutes) then downside risk opens for prints in the 2082-2057 area.

The S&P 500 has immediate resistance in the1253-1262 area, then 1270-1287 area. The index is testing a band of support which was expanded by Tuesday's price action to 1265-1235. (I know these price levels overlap with resistance). If the index starts to print below 1235, then downside risk (for the next 3 to 5 trade days) would open for prints in the 1212-1184 area.

Cherney is Market Analyst for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal.