Positive Bias Anchors the Market

Friday has the greatest potential to see a good price move as employment numbers unfold

By Paul Cherney

Two special notes: 1) On Tuesday, July 3, 2001, the NYSE will close at 1:00 p.m. EDT.

2) I will be taking vacation days on Tuesday, July 3rd, Thursday, July 5th and Friday July 6th. 'On The Market' will return Monday July 9th. Since I have to run overnight systems anyway I think I will be able to give pre-opening comments for those days despite the fact that I am on vacation.

There is a positive bias in place for the equity markets. This means that I expect to see net gains into the middle of the month. (Net gains just means that I expect the NASDAQ and the S&P 500 to be higher near the middle of the month than they are now, it does not mean every single day is a gainer.)

The next two trade days could easily see lower prices, especially for the NASDAQ, which registered another overbought signal in the overnight systems run conducted over the weekend.

Late in Monday's session, intraday volume measures for the NASDAQ registered levels, which have increased the odds that the 2143.79 level will be re-tested and/or undercut sometime before noon on Tuesday. Therefore, I would be reluctant to embrace any opening strength on Tuesday as the beginnning of a protracted rise unless the buying was inspired by a headline of undeniably bullish importance.

Friday has the greatest potential to see a good price move. I think the employment report can only be good for the market. Here's my rationale: If the numbers show signs of strength, the markets will probably embrace the notion that the economy has turned the corner (read: buy stocks). If the employment numbers show additional signs of weakness, the markets could easily rationalize that the Fed can still lower rates.

The NASDAQ has resistance 2154-2187. The next resistance is 2202-2330. Inside this area is a focus of resistance 2210-2236 which looks formidable. There is a huge layer of support in the 2084-2017 area.

The S&P 500 has immediate support 1228-1219 area. The S&P 500 has immediate resistance 1240-1261 with a focus 1245-1255. The end-of-day charts show resistance 1250-1316.

The index has well-established support in the 1212-1184 area and if prices moved into this area, buyers should merge.

Cherney is Market Analyst for Standard & Poor's