More Upside Possible
By Paul Cherney
Note: Because of technical problems, Paul Cherney's column could not be published on Jan. 29. The column will return Jan. 30. We apologize for any inconvenience this may cause our readers. The Jan. 28 column follows:
I do not think that these markets can just trend higher right now.
I do not have indicators which offer any high probability insight as to whether Tuesday's gains can see follow-through on Wednesday, but the pattern in the VIX's (market volatility index) chart looks constructive and a lower VIX in Wednesday's market could easily unfold (a lower VIX usually coincides with higher equity prices).
The VIX will probably offer the easiest way to gauge whether price action can see follow-through. If the VIX can manage to move below 35.55-35.05, then this would be a background positive and probably bolster buying.
I recognize that the VIX is still above its 10-day exponential moving average, and this represents a wildcard for weaker stock prices, but my comments above about a VIX move under 35.05 are what I'll be focusing on in Wednesday's market. The VIX's 10 day exponential moving average was near 32.96 near Tuesday's close.
The Nasdaq's next layer of substantial resistance is 1358-1383. The index has small shelves of resistance at 1340-1350 and 1353-1359. I do not think that the markets can simply trend higher, but there is a chance for another day of positive closes.
The Nasdaq has immediate intraday support at 1333-1320. If the Nasdaq printed 1315, it would represent a 50% retracement of the gains seen from the Oct. 10 low to the Dec. 2 high and that would be a sign that the bears and the bulls are at equilibrium, making it a coin toss as to whether prices will retrace to the October support of 1157-1108.
The S&P 500 has a small shelf of resistance at 859.71-869; the thickest resistance inside this shelf is 862-865. Thick, substantial, strong resistance is 876-890
The S&P 500 has support at 852-844. The S&P 500 would have to print 840 to increase the chances for a drop to test the support at 806-768.
Cherney is chief market analyst for Standard & Poor's
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