Fading Momentum

Tuesday's trading action is going to start to swing some key Nasdaq volume measures toward negative readings

By Paul Cherney

I am no longer as comfortable stating that the line of least resistance is higher for the Nasdaq. The imbalance between down volume and up volume in Tuesday's session is going to start to swing some of my volume measures toward negative readings. There still should be residual positive momentum created by the lift from the late February low, but it might not be able to generate anything significant in the way of follow-through higher (especially since we are approaching earnings warning season).

So, while I do expect to see another attempt to move higher, I think it is going to require a headline everyone can embrace as bullish to keep upside momentum the dominant theme (for the Nasdaq).

This 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. Wednesdays often can have a flat to lower open and then lift from the lows of the session. That is my best guess for Wednesday's action.

The Nasdaq has resistance in the 1901-1960 area with a focus of 1908-1942. The next layer of resistance above the 1942 level is 1956-1967, then 1977-2010, with thick resistance at 1984-2010.

Immediate support for the Nasdaq is at 1881-1865, then 1852-1841. I expect to see some downside early in Wednesday's session but the 1881-1865 layer of support should hold if prices get that low. Wednesdays in option expiration often can show a drop and then an intraday recovery, with a positive close for the session and that is what I expect in Wednesday's market.

The S&P 500 has a layer of support at 1161.00-1154, then 1158-1143, which makes 1158-1154 a focus of support.

The S&P 500 has been caught in a band of intermediate term resistance which runs from 1150-1177. Immediate intraday resistance is a shelf at 1168-1173. The next layer of resistance is 1190-1206.

Until I see something else (technically), I think I have to give the benefit of the doubt to the upside, but I am concerned about investors' hesitancy to commit on the long side to techs in the midst of earnings warning season.

Cherney is market analyst for Standard & Poor's

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