Downside Remains Limited

The trend is positive, but some sideways consolidation is likely

By Paul Cherney

The markets were -- and perhaps still are -- overdue for some consolidation. I think the downside is limited. Both the Nasdaq and the S&P 500 have established good layers of support. For the S&P 500 the layer of support is 905-867; for the Nasdaq it's 1361-1279.

Studies based on the VIX (market volatility index) suggest high odds that the S&P 500 will close Monday's session above 905.46, so I think there is limited downside for Friday and Monday's markets.

If the S&P 500 were to move lower in price, I think that a test of immediate support will bring buyers to the market (short-term).

Immediate support for the S&P 500 is 894-885.

Here is the the simplest way I can sum things up right now: The lows are in. The trend is positive, but some sideways consolidation is likely.

Support: The S&P 500 has multiple stairsteps of support. Immediate supports are 894-885 and 890-873, which makes the 890-885 area a focus of support.

Immediate Nasdaq support is 1361-1279; there is a focus at 1351-1342.

Resistance: Immediate intraday resistance for the S&P 500 is 904-917 and 909-928, which makes the 909-917 area a focus of resistance.

The Nasdaq has thick resistance at 1360-1427. Immediate resistance is 1385-1400. Another layer of resistance was established intraday on Monday: 1410-1420.

Cherney is chief market analyst for Standard & Poor's