Upside Remains Limited
By Paul Cherney
Here are some historical statistics for the Tuesday after Memorial Day, based on S&P 500 data from 1972-2002:
• The average performance (all gains and losses combined) was flat for the day, a minor gain of .006%;
• The day saw gains or losses of more than 1% on only 5 occasions, which means that 84% of the time, the S&P 500 closed within 1% up or down of the previous Friday's close;
• The S&P 500 gained ground for the day 17 out of 31 times, 54.8% of the time, (just a "coin toss" in terms of guessing at whether prices would be higher or lower);
• If we looked at just the gaining day performances and averaged just them, the average gain was only +0.53%, a little less than 5 points for today's S&P 500.
More sideways action is the historical norm for the first day after the Memorial Day weekend.
Near Thursday's close, the VIX's (market volatility index) 10-day exponential moving average was 22.33.
Historical odds still favor that the S&P 500 should post a close of 911 or lower. Longer-term indicators based on weekly bars are in configurations which usually do not see appreciable upside, so in the longer-term (more than the next trade day), sideways markets might unfold and the bottom edge of the sideways price band might not have been discovered yet.
The S&P 500 has a layer of support at 925-912. The end of day charts clearly show substantial support at 910-862.
The S&P 500 has resistance at 935-948, with a focus of 938-945.
The Nasdaq has a band of resistance at 1489-1519.00; inside this band smaller pockets of resistance are 1499-1507.96 and 1507-1519.00, which makes the 1507-1508 area a focus of resistance. Next well-organized resistance is 1534-1551 but technically, the resistance above 1519 starts at 1526 and higher.
Nasdaq support is stacked: 1494-1480 and 1478-1451, with thick support at 1471-1461.
Cherney is chief market analyst for Standard & Poor's