Room to Rise

There is still a chance for gains on Wednesday -- and the best major averages' best levels for the week might come Wednesday or Thursday

By Paul Cherney

Even though intermediate-term indicators are still negative for both the Nasdaq and the S&P 500, these indicators reached levels which often see a relief rise. We saw two days of gains (Friday and Monday) on very unconvincing volume. Tuesday's price action was not terrible. There is still a chance for gains on Wednesday and I think the best prints for the week might come Wednesday or Thursday.

If the S&P 500 and the Nasdaq go to new intraweek highs in Wednesday's market, there had better a be bullish headline to bring cautious investors in off the sidelines, because if there isn't, I just don't think the volume demonstrated over the past couple of sessions can sustain anymore gains. There is no volume coming into this rise.

This is options expiration week and Wednesday's trading could look a lot like Tuesday's, except there should be a little better upside unless Applied Materials' (AMAT ) earnings release really disappoints.

Immediate Nasdaq resistance is at 1841-1873 with a focus of 1845-1854. Tuesday's intraday high was 1852.22, right inside the focus. Position trading bears will start to feel the pressure to cover open shorts if there are prints above the Nasdaq 1855 level. Unless there is a headline recognized as thoroughly bullish, the first move by the Nasdaq to prints above 1855-1860 might see a flurry of buying and a quick shot higher as short-term bears throw in the towel and cover positions. Immediate support would then become former resistance (1855-1841 would become support).

Immediate Nasdaq support is at 1830-1815. If there are prints below 1815 for more than one minute without attracting buyers to push prices back above 1815, then I expect a test of the next layer of support: 1799-1781. The index has intermediate term support at 1823-1781. Below that, support is at 1760-1677, with a focus of 1740-1701.

The S&P 500 index has well-defined intermediate term support in the 1111-1052 area. There is a focus of support inside this region at 1094-1080; below 1080, the next layer of support is at 1075-1052.

The "500" has immediate support at 1109-1101. Tuesday's intraday low did not violate this support (the intraday low print was 1102.98.) The index has established a solid layer of support at 1097-1077 and I do not think this layer can be broken over the next couple of trade days.

Immediate S&P 500 resistance is now at 1119-1129.40.

Cherney is market analyst for Standard & Poor's

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