Sitting on the Fence

With key economic data due Friday, Thursday could be another day of hesitation

By Paul Cherney

With retail sales and PPI due on Friday, Thursday could be another day of hesitation. I think the equity market has run out of sellers in the short-term. Downside should be limited to a retest of the lows seen on Wednesday morning (not expected). This would mean downside risk for the Nasdaq to print 1934.67. The S&P 500 could undercut Wednesday's low, but buyers should prevent prices from moving below the 1139 level.

Wednesday's price and volume action was just okay. Not enough of the elements I wanted to see for a reversal day came together in the ways I am used to seeing them converge but there were enough buyers to prevent a full scale sell-off so that might have established a short-term bottom for prices. While the downside looks limited, upside is limited too, probably to brick wall resistance levels mentioned below. There still has not been a short-covering rally, it would probably take a Nasdaq price move above the 1985 to spark some earnest short-covering.

Nasdaq: Immediate intraday resistance is 1974-1986 then 1994-2016. End-of-day charts show NASDAQ resistance in the 2039-2104 area with a focus 2088-2101. The next resistance is a brick wall at 2137-2181.05.

The Nasdaq has a layer of support at 1961.57-1844, Wednesday's price action has established the 1961-1934 area as immediate support.

Immediate S&P 500 resistance is 1184-1202 then 1207-1218, there is a brick wall of resistance in the 1227-1240 area.

Immediate S&P 500 support is now 1170-1139 and this area should hold if tested, Wednesday's low print was 1168.46.

Cherney is Market Analyst for Standard & Poor's

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