Positive Trend in Place
By Paul Cherney
There should be a positive underlying trend in place over the next six to nine trading days. I would become concerned (not expected) that a bigger decline might be in the making if the Nasdaq dropped to print under 1714-1685 without attracting buyers immediately.
This week is options expiration week and sometimes Tuesdays and Wednesdays can jam prices in opposite directions.
Here's a guess as to the potential for price movement on Tuesday. On Tuesday, Intel (INTC ) is reporting earnings (usually after the close). In Tuesday's market, there could be continued strength, a labored advance ahead of Intel's earnings announcement. Even if Intel's earnings report is good, Wednesday's opening could see some profit-taking.
The opening jump in prices on Monday morning has converted former resistances to tentative immediate supports, which puts both the Nasdaq and the S&P 500 inside trading bands because neither of the indexes were able to close above the upper edge of their resistance levels.
The trading bands are:
• Nasdaq 1722-1758, with an immediate focus of support 1749-1736; immediate resistance is now 1762-1776.10 (established intraday on Monday).
• The S&P 500's trading band is 988-1015.41. with immediate support inside the band at 1006-1000 and immediate resistance 1010-1015.41.
The VIX's (market volatility index) 10-day exponential moving average was 21.47 very close to Monday's close. I would imagine that the VIX is going to have stay below that level to act as confirmation of a lift in prices. It would probably be better for bulls if the VIX could move below 20.83.
Resistance: The S&P 500 is stuck in a band of prices which is both support and resistance. The important focus of resistance is 1010-1015.41. 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's trading band is 1722-1758.18. In Monday's market, the index established immediate intraday resistance at 1762-1776.10. 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.
Cherney is chief market analyst for Standard & Poor's