Lower Prices Likely
By Paul Cherney
Wednesday's session re-inforced the upper edge of the brick wall resistance for the NASDAQ. I saw no headlines worthy of the intraday reversal in prices. CNBC's Bob Pisani said that rumors circulated late in the day (through trading desks) that the U.S. was bombing Iraq (unsubstantiated, and not a headline on the wire services I was watching).
I do think, though that many people realize that the markets have come a long way in this new year in just a few trade days. It is obvious that there were plenty of people willing to be sellers as the indexes reached into the upper edges of their brick walls of resistance.
I still think the downside is limited for the next 5 to 8 trade days. A gap opening higher on Thursday (if one occurs without a headline of undeniably bullish importance) will probably run out of momentum within the first 20 to 30 minutes of trading and a retracement to print in negative territory will probably find a floor for prices not too far below Wednesday's closes.
If the markets gap lower at the open it will probably be a short-lived drop and a search for an intraday bottom should follow. I don't know that there can big gains on Thursday, but the downside still appears limited.
In the intermediate term: Unless I see something definitive in the technical measures I use, I am assuming the following price pattern: a positive bias into the middle of January, then some more consolidation, then another lift in prices starting near the beginning of February (which could run out of momentum and lead to a more concerted bout of profit-taking).
The NASDAQ still has immediate intraday resistance 2047-2061.06. The next layer of resistance is 2067-2106 there is a focus of resistance 2084-2098.
Immediate support for the NASDAQ is 2033-2014. The NASDAQ has another layer of support 2003-1980. If there is a brief dip in prices on Thursday, prints near 2027-2022 should bring some buyers to the marketplace. The NASDAQ has well defined intermediate term chart support (I am looking at weekly bars here) at 1965-1853.
The S&P 500 has intermediate term brickwall resistance 1153-1206. The index has a focus of resistance in the 1173-1194 area (Wednesday's intraday high was 1174.26). Immediate support is 1159-1150. Then 1147-1137.
Cherney is market analyst for Standard & Poor's
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