Struggling to Move Higher
By Paul Cherney
On June 18, the Nasdaq closed at 1988.63. That was the seventh day in a row that the index had lost ground. Since 1990, the index has only had seven consecutive losses on nine prior occasions. (There were three occasions in the series where a seventh consecutive loss turned into an eighth consecutive loss, but for the purposes off this study I only looked at the first occurrence of seven consecutive losses.)
The average close-to-close loss in the wake of seven consecutive Nasdaq losing sessions was -2.35% sometime in the first 10 trade days after the seventh loss. If today's Nasdaq were to have a 2.35% loss from Monday's close, the index would close at 1941.90, virtually identical to the bottom of the price gap established on Apr. 18, 2001, which is now 1973.70-1941.57.
The Nasdaq is so oversold on a short-term basis that it should try to work higher over the next couple of trade days, but prices might not get very far.
Major Nasdaq resistance is 2100-2187 and if the index manages to print in this area, it is a likely spot for some short term profit-taking (unless there is a headline of undeniably bullish importance).
Immediate Nasdaq resistance levels are 2025-2041 and then 2046-2079. Historic odds based on price performance in the wake of seven consecutive losses are about seven in 10 that the index will close below the 1988.63 level in the 10 trade days following seven consecutive losses.
The S&P 500 is testing resistance in the 1219-1228 area, the next resistance is 1241-1263. The S&P 500 has well-established support in the 1212-1184 area.
Cherney is Market Analyst for Standard & Poor's