Taking a Breather

Momentum measures remain positive but the markets are retracing some of the recent gains

By Paul Cherney

Note: Paul Cherney's column will not be published on Monday, Sept. 8. It will return on Tuesday, Sept. 9.

The Nasdaq's breakout of its trading range has created the potential for a test of 1,912-1,954. The S&P 500 has the potential to print 1,047-1,070. There is no time frame for these potential moves.

Momentum measures remain positive but the markets are retracing some of the recent gains. A brief dip in prices probably will 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.

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. There is another layer of resistance at 1,874-1,893; this layer of resistance is based on intraday trade (60 minute bars) from March 18 and 19 of 2002. The further back in time you go, the less important short-term intraday price ranges become.

The Nasdaq has a price gap created by the opening on March 12, 2002. These are hourly charts and the gap runs 1,899.01-1,928.12. Quite often, the first test of a price gap brings sellers to the markets.

Immediate intraday resistance for Nasdaq, created by Friday's price action, is a small shelf at 1,863-1,870.

Nasdaq immediate intraday support: due to the mostly sideways trading on Wednesday and Thursday, there are multiple layers of support. The Nasdaq finished Friday's session inside 1,860-1,846 support. The 1,846 level looks important on a short-term, intraday basis; if 1,846 is undercut broken for more than 4 minutes, downside risk opens for a possible test of the next layer of well-defined intraday support which is 1,825-1,799, and buyers should emerge if this level is tested.

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. This week, the index has been unable to print above the 1,031 level. The next resistance is big at 1,048-1,107, from March, 2002. Two different measures of the potential upside for the current break above the 1,015 level target 1,047 and 1,070 as potential upside prints.

Immediate support for the S&P 500 is 1,015-988 with a focus at 1015-1008.

Cherney is chief market analyst for Standard & Poor's

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