A Shift to Neutral
By Paul Cherney
Intermediate term indicators are now neutral (an improvement from negative).
Trading volume at the Nasdaq and the NYSE has been anemic. This is telling me that higher prices are not enticing participation from the sidelines which keeps the action in the markets largely in the hands of short-term traders. (Good traders can change their minds at the drop of a hat , which can lead to some volatility.)
This is options expiration week and the trading volume at the CBOE has been sub-par. This increases the potential for a volatile day on Thursday because there may have to be February option contracts closed out and hedges unwound.
Short-term price momentum is positive and that is the most likely course for prices by Thursday's close.
The Nasdaq closed Wednesday's session inside immediate resistance: 1841-1873. Above 1873, the next layer of resistance is at 1893-1960. Immediate support is stairstep in fashion: 1847-1833, then 1830-1815. I don't think the market can print below 1815 on Thursday but if there were prints below 1815 for more than one minute without attracting buyers to push prices back above that mark 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 1075-1052.
The S&P 500 index has immediate support at 1109-1101. 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, with the 1126-1129.40 area a focus of resistance.
Cherney is market analyst for Standard & Poor's
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