Upside Potential

The odds favor limited downside for the Nasdaq and the S&P 500. The line of least resistance is for higher prices

By Paul Cherney

The type of momentum demonstrated over the past ten trading days usually has a lingering positive effect. Until I see technical evidence to the contrary, I think odds favor limited downside for the Nasdaq and the S&P 500. The line of least resistance is for higher prices.

This coming week is the week of the Triple Witch -- when stock options, stock index options and stock index futures expire on the same day. That will happen on Friday. There could be some hesitation on Monday or Tuesday. Wednesdays are usually the most volatile days of a Triple Witch week (usually openng flat to lower but then gaining strength in the day).

In Friday's session, the Nasdaq tested the meat of the focus of resistance in the 1915-1942 area. This is part of a broader band of resistance which runs from 1901-1960. The next layer of resistance is 1984-2010.

The S&P 500 has a layer of support at 1158-1143. The next layer: 1127-1107, with a focus at 1127-1121 (which is not expected to be tested in the week of the Triple Witch). The S&P 500 has been caught in a band of resistance which runs from 1150-1177. The next resistance above that is at 1190-1206.

Until I see something else technically, I think the line of least resistance is for higher prices.

Cherney is market analyst for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE