By Paul Cherney
Price action on Wednesday was that of a market not truly convinced to move higher or lower.
Here are some positive points that should prevent the markets from moving dramatically lower in the next couple of trade days: Greenspan's comments were a positive, so why didn't the market move higher? Sometimes there is a day delay in reaction to comments from the Fed. Also, the earnings reports should tend to be supportive of prices. There should be a positive tone in place but I do not expect a rocketshot to the moon.
The Nasdaq has support 1806-1779 but the important focus of support is 1806-1799. If prices are going to see good follow through higher, retracements in price should find buying support at or above the 1806-1799 level, we saw that on Wednesday as the intraday low for the Nasdaq was 1804.65, inside the 1806-1799 focus of suport. I expect a more positive tone in Thursday's session, but I also know that I would simply be wrong in my expectations if prices were to move below the 1799 level for more than three or four minutes without attracting buyers to lift prices back above the 1806 level.
And to reiterate from Tuesday's end of day comment: It would not be healthy to see Nasdaq prints below 1779 because 1779 was Tuesday's gap opening price and if prices were to move below this level it would be a sign that the move up was more fueled by short-term traders than by longer-term investors. (I do not expect prices on Thursday to test 1779 but if they do and prices break lower, the downside risk is for a test of the next layer of support 1772-1751 with a focus 1761-1764.)
The Nasdaq has immediate resistance 1812-1873. There are two focuses of resistance: 1824-1832 then 1840-1853. The 1824-1832 area is pretty thick resistance and turned prices lower in Wednesday's session as the intraday high was at the upper edge of this focus, the intraday high for the Nasdaq was 1832.01, so it is an important resistance level.
The S&P 500 has immediate resistance 1120-1133.31. It's descent from the beginning of March has been stair-step and that creates multiple steps of resistance above the current prices. I think it would be short-term bullish if the index could close above 1133.31 but understand that due to the nature of the descent, it is unlikely that the index will simply move higher each day. There are plateaus of selling interest above the current prices and that should make for a labored advance. But I do expect an advance. Next stairstep above 1133.31 is 1142-1157. The importance of the 1133.31 level as resistance was reinforced in Wednesday's action as the S&P 500's intraday high was 1133.00 before prices were turned down.
If the S&P 500 were to print below 1121 for more than three or four minutes without attracting buyers to lift prices, then there would be downside risk for a test of the 1114-1102 level (not expected).
Paul Cherney is markets analyst for Standard & Poor's