Downside Risk Looks Limited

Momentum from Monday's rally should have a lingering positive effect on the market

By Paul Cherney

Downside risk appears limited. There has been enough momentum generated by the markets on Monday that there is a lingering positive effect which lasts for more than a couple of trade days. This does not mean that every single trade day is a huge gainer, but higher prices are likely.

Resistance: The S&P 500 has immediate intraday resistance at 1010-1015.33. The bigger picture of resistance, which was established by price action in June, 2002, is that the S&P 500 has a band of resistance at 1008-1041 with a focus of 1020-1031.

The Nasdaq has immediate resistance at 1722-1748; it actually runs all the way to 1754. The next layer of resistance is 1778-1829.58. There is a gap in the price chart which runs 1778.80 to 1796.46, which was created by a downward gap at the opening on Apr. 22, 2002. Sometimes the first print inside a gap like this will draw sellers.

Support: The Nasdaq has immediate intraday support at 1734-1713, then 1715-1693, which makes the 1715-1713 area important support. Monday's price action has converted 1684-1600 into a big band of support.

Immediate intraday support for the S&P 500 is 1005-996.94, then 990-984.80. There is a big band of support for the S&P 500 at 992-963.25.

Cherney is chief market analyst for Standard & Poor's

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