Downtrend Still in Place
By Paul Cherney
Note: Paul Cherney's column will not publish on Friday, June 7. It will return on Monday, June 10.
If you look at a daily chart for the Nasdaq you can easily see that since the first week in January, the index has been in a downtrend. There is nothing in the technical measures I use to suggest that the trend has reversed. In Tuesday's column, I warned that I had intermediate term indicators which were in configurations which usually see the markets trade in a jagged fashion sideways to lower. This condition can still exist for as few as 2 more trade days, maybe as many 12.
I was wrong about follow-through to the upside in Thursday's session. Merrill's downgrade of Intel and 6 other chip-related stocks helped to send prices lower. Intel is having a mid-quarter update near 5:30 pm EDT on Thursday and maybe the company can offset some of the damage done in the markets. Most analysts expect the company to guide to the lower end of expectations. That has probably already been factored into the price of the stock, so it might not surprise too many market observers to see a rebound in Intel shares during Friday's session. If Intel can manage to impress, there could be a broader rebound in prices, but the classic signs I like to see to signal increased chances for a rebound which leads to a protracted advance simply are not present right now.
Markets can reverse without huge volume and high Put/Call ratios, but since most market players have become accustomed to seeing these signposts before making two-fisted commitments to the long side, without those signposts, many people will remain comfortably parked on the sidelines, simply observing.
The Nasdaq and the S&P 500 are oversold on a short-term basis and a rebound in prices could occur on any trade day.
Total trading volume for the NYSE was high in Thursday's session and this is a potential background positive for Friday's markets.
Immediate resistance for the Nasdaq is 1568-1595, with a focus of 1572-1581.
For the S&P 500 immediate resistance is 1038-1050, with a focus of 1041-1047.
Immediate Nasdaq support is 1560-1548.31. If the index were to close below the 1548.31 level, the next level of support is 1516-1466.
Immediate support for the S&P 500 is 1022-998.
Cherney is chief market analyst for Standard & Poor's