Momentum Remains Positive
By Paul Cherney
On a pure chart basis, the Nasdaq's breakout of its trading range has created the potential for a test of 1,912-1,954, while the S&P 500 has the potential to print 1,050. There is no time frame for these potential moves.
Intel (INTC ) gives its mid-quarter update after Thursday's close and that could boost prices or force profit-taking. These markets are overdue for some profit-taking, and Intel would have to provide extremely robust guidance to force a huge leg higher right now.
Momentum measures remain positive. A brief dip in prices (one that lasts more than just intraday) would probably not generate significant downside. Usually with longer-term momentum measures in their current configurations, a dip in prices is ultimately viewed as a buying opportunity.
A stronger than expected employment report Friday would give a short-term boost to prices. The Street expects an increase in nonfarm payrolls of about 20,000, The unemployment rate is expected to be unchanged at 6.2%.
If prices were to jump higher at Friday's open (without an uplifting headline either related to the markets or from outside the marketplace), then I think the sellers could become very aggressive. A jump higher at the open which fails to find follow-through and then sees prices undercut the intraday lows, that would be a sign that short-term buying interest might have been used up.
The Nasdaq has a pretty thick layer of resistance established during March, 2002, and it is well defined at 1,845-1,946 with a thick shelf at 1,846-1,873. Thursday's high print was 1,870.00. Resistance becomes especially cluttered with prints of 1,933 and higher because not only is there resistance from March, 2002, there is also the beginning of resistance dating back to June and July of 2001.
S&P 500 resistance (daily bar charts) was established by price action in June, 2002; it is 1,008-1,041, with a focus at 1,020-1,031. In Thursday's session, the index printed a high of 1,029.34. The next resistance is big at 1,048-1,107, from March, 2002.
Immediate support for the S&P 500 is 1,015-988, with a focus at 1,015-1,008.
Immediate support for the Nasdaq is 1,841.48-1,832.08, then stacked at 1,830-1,773; it becomes thick starting with prints of 1,797-1,778. Support runs all the way to 1,737.
Cherney is chief market analyst for Standard & Poor's