No Capitulation Yet

Some of the signs have emerged in recent days. But there simply was not enough Nasdaq volume on Friday

By Paul Cherney

Bits and pieces of a capitulation have appeared within the last few trade days, but they all haven't appeared at once.

Today there simply was not enough Nasdaq volume to declare a classic day of capitulation.

Markets can turn without excessive volume, but many people expect to see it.

I have intermediate term indicators which are in set-ups that can be followed by net gains for as few as 3 to 5 trade days and sometimes more protracted runs unfold, but technically, these signals will not fire unless the VIX (volatility index)moves and closes below its 20-day exponential moving average. The 20-day exponential moving average of the VIX was roughly 25.54 as of Friday's close.

The Nasdaq has immediate resistance at 1514-1526.41. The index has thick resistance at 1532-1550. The index's next focus of resistance is 1560-1570, and prints in that area would probably bring sellers to the market (if the index could get there).

For the S&P 500, immediate resistance is 1017-1028, with a focus of resistance at 1017-1023.47. The next resistance is 1032-1037.80. There is thick price traffic at 1039-1047.

Immediate Nasdaq (intraday) support is 1472-1445 and then the entire price range from Sept. 21, 2001, meaning 1454-1387. Friday saw the Nasdaq dip to test the trading range of Sept. 21, 2001. That trading range represents buying support that I expect to hold on this downleg. I do not have a crystal ball that lets me predict headlines about India and Pakistan or the Middle East or the war on terrorism, so these items remain an unknown which cannot be part of the technical picture. (If there are adverse headlines generated in one of these global theaters, then prices will be affected. But I can't predict headlines.)

Immediate intraday support for the S&P 500 is 998-981 and the entire trading range generated on Sept. 21, 2001, which is 984.54-944.75.

I think there is limited downside right now.

Here are the price ranges and closes for the NASDAQ and the S&P 500 from the day of the September, 2001, lows:

• S&P 500 intraday high 984.54, intraday low 944.75, close 965.80

• Nasdaq intraday high 1454.04, intraday low 1387.06, close 1423.19

Cherney is chief market analyst for Standard & Poor's

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