Running into Resistance
By Paul Cherney
The markets are in a one-on-one relationship with the headlines out of Iraq and it will probably take headlines of success in some aspect of the war to propel prices further than the immediate resistance levels they are testing.
Friday is the quarterly expiration (known as the Triple Witch --please see the ), but that does not really matter. News on the war front is what is moving the markets.
The momentum generated by the lift in prices for both the Nasdaq and the S&P 500 reached technical threshold levels which usually means that there is a residual effect, but that effect is waning. This does not mean that prices have to drop dramatically, it means that the markets are probably bumping their heads against a ceiling for prices as momentum players book profits.
It will probably take a positive headline from the war to prevent prices form closing with minor losses on Friday.
The focus of resistance for the S&P 500 starts at 887 and runs through 911. There is a particularly thick area of price traffic from 893-911 and unless there is a huge positive development in the war, this resistance looks like a short-term brick wall.
Resistance for the Nasdaq is 1400-1467, with a focus of resistance at 1420-1454 -- especially thick from 1433-1447. The Nasdaq has a price gap dating to price action from Jan. 16-17 of this year. On Jan. 16 the index posted a late afternoon low of 1420.87 and then gapped lower in the following session when it opened at 1401.37. Part of that gap was filled in Thursday's session when the index printed a high of 1411.41, so the gap is now 1411.31-1420.87. Gaps don't always get filled, but this one will, eventually.
Immediate intraday Nasdaq support is 1397-1384; technically the support runs all the way to 1371, but its strength is 1397-1384. Substantial support is 1353-1326 and 1363-1331, which makes 1353-1331 thick with support.
Immediate S&P 500 intraday support is 868-859. Next support is 857-850. Next support is considerable at 853-835.
TRIPLE WITCH: Before the introduction of individual stock futures, the quarterly expiration of index futures, index options and stock options was commonly referred to as the Triple Witch. Now the media is starting to call it the Quadruple Witch. If it's all right with everyone I'd prefer to just continue calling it the Triple Witch. The media has jumped on the introduction of individual stock futures as a reason to change the name, but really, before there even were individual stock futures it was a Quadruple Witch due to the expiration of options on futures. So, now is it a Quintuple Witch? The term "Triple Witch" works fine.
Cherney is chief market analyst for Standard & Poor's