A Negative Trend

Friday's drop in prices was not a healthy sign for the markets

By Paul Cherney

Friday's drop in prices was not a healthy sign for the markets. The short-term trend is negative. Next week is the week of the Triple Witch -- when the monthly stock and index option expirations coincide with the quarterly expiration of futures contracts. I think there is probably going to have to be at least one more day of lower prices either Monday or Tuesday. I still do not think that S&P 867 or Nasdaq 1317 can break on a closing basis unless there is a headline which we all recognize to be definitively bearish. (Headlines always represent a wildcard for the markets.)

The jump in the VIX (market volatility index) back above its 10-day exponential moving average is not encouraging. On Friday, near the close, the VIX's 10-day exponential was near 31.78.

In Friday's session, the Nasdaq closed below the 1367 level (band of support was 1388-1367). This has opened immediate downside risk for a test of the next layer of support 1347-1317.

Support: The S&P 500 has multiple stairsteps of support within the broad 926-867 area of support. It is testing the lower edge of 897-887 then 884-867. There is considerable price traffic (support) in the 883-875 area.

Immediate support for the Nasdaq is 1347-1317, then 1300-1280.

Resistance: The S&P 500 has resistance at 932-965. Immediate intraday resistance is 897-910, then 915-926.27 and 932-944.

The Nasdaq has immediate resistance at 1381-1412, then 1407-1426, which makes the 1407-1412 area a focus of resistance.

Cherney is chief market analyst for Standard & Poor's

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