Odds Favor Additional Gains
By Paul Cherney
The CBOE Put/Call ratios were extremely high on Friday, and this puts the odds in favor of gains.
There should be a positive underlying trend in place over the next seven to 10 trading days. I would become concerned (not expected) that a bigger decline might be in the making if the Nasdaq dropped to print under 1660 without attracting buyers immediately .
I had originally thought that there should be a drop in prices on Monday morning, which the markets would view as a buying opportunity, but the high P/C ratios near the end of Friday's session are simply making me think I was wrong about a Monday morning drop in prices. The underlying trend should be for higher prices.
Next week is options expiration week and sometimes Tuesdays and Wednesdays in those weeks can jam prices in opposite directions.
Resistance: The S&P 500 has immediate intraday resistance at 998-1015 with a focus at 1000-1005.33, and a focus of 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 at 1020-1031.
The Nasdaq has immediate resistance at 1722-1748; it actually runs all the way to 1758.18. The next layer of resistance is 1778-1829.58. There is a gap in the price chart which runs 1778.80 to 1796.46. It 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 1735-1713, then 1715-1693, which makes the 1715-1713 area important support. Additional support is 1684-1648. I think it would be unhealthy if the index printed below 1660 without attracting buyers immediately.
Immediate intraday support for the S&P 500 is 990-983.63, then 980-962.10. I think it would be unhealthy if the index printed below 960 without attracting buyers immediately. There is a big band of support for the S&P 500 at 948-912.
Cherney is chief market analyst for Standard & Poor's