By Paul Cherney
All the sideways travel in the markets which occurred from the last week of October until this past week represents a sturdy base of support. Those levels are NASDAQ 1425-1317 (that is 1317), S&P 500 926-867. I do not expect these levels to break.
As of the close on Tuesday, Dec. 10, the historical odds build for the re-establishment of a more consistently positive price trend. Over the past 42 years of the S&P 500, the odds are roughly 7 in 10 (74% of the time) that the December low will occur on or before (for this year), Dec. 10 (Tuesday).
I am waiting to see a drop in the VIX under it's 10-day exponentilal moving average as an indication that the December low has been established (and that a more consistent trend higher will unfold). Near Monday's close, the 10-day exponential moving average of the VIX was near 32.10.
The chances are high for a drop in prices at or near the open on Tuesday. Since Tuesday is an FOMC meeting day, the opening weakness probably won't find much followthrough and should rebound, but still remain negative (provided there are no headlines of undeniably bearish importance).
Typically on an FOMC meeting day, prices tend to make a move in one direction at the open, then return toward unchanged, then they spend most of the trade day in a sideways pattern until just before the announcement.
Past performance is no guarantee of future results, but there have been two price patterns established this past year which might recur on Tuesday:
1) When the announcement is made, prices will usually have a knee jerk reaction in one way or the other. That usually is followed by a counter move but then finally, the day ends (usually) with prices moving in the direction of the initial reaction to the announcemnt.
2) This year there has been a pattern established (6 out of 7 times), that the day following the meeting will have prices move in the opposite direction of the price close on the day of the meeting.
The S&P 500 has multiple stairsteps of support within the broad 926-867 area. 897-887 and 891-872.
Immediate NASDAQ support is 1347-1317.
The S&P 500 has resistance 932-965. Immediate intraday resistance is 915-926.27 then 932-944.
The NASDAQ has resistance 1371-1395 then 1407-1426.
Cherney is chief market analyst for Standard & Poor's