Dow Will Run Out of Steam
By Paul Cherney
The S&P 500 and the Nasdaq have revisited their closing prices on the day before the September 11 tragedy. The DJIA is approaching its price levels from just before 9/11 (The DJIA closed Monday 9/10/01 at 9605.51). It was the DJIA price action from 1933 and 1930 (when a weekly DJIA decline of more than 10% was followed by gains on the very first day of trading after the 10% weekly decline which has worked as the blueprint for prices in this market and I will continue to rely on that price action to offer insight now.
The DJIA will probably not be able to close above the 9605.51 level unless there is a positive headline from the War on Terrorism. Prices should start to lose some upside momentum now. If the DJIA recreated the rebound closes after 10% declines in 1930 and 1933, it would equate to DJIA closes of 9460 and 9512. There is probably enough momentum in place for a close above 9460 to occur, but then some sideways to lower prices should unfold before another attempt to move higher.
If I'm wrong, then the DJIA would likely break above 9842 on good volume. (I don't think the market is ready to do that without a a headline to spur more short-covering and more enthusiastic buying.)
For right now, there should be a little more upside in the markets before some digestion of the gains.
Immediate S&P 500 support is 1072-1052 with a focus 1067-1052.70. The index finished Thursday's just above the 1073-1096.94 area of resistance. The next layer of resistance above the 1097 level is 1114-1135.52. (Resistance gets thick with prints of 1023 and higher.)
The S&P 500 has substantial buying support 1050-1026, within this band of support there is a focus of support 1042-1034.
The Nasdaq has substantial support 1642-1584. Immediate intraday support is 1692-1674. There is a focus of resistance 1710-1733 which is inside a broad band of resistance 1669.94-1770.76.
Cherney is market analyst for Standard & Poor's