Positive Momentum Waning
By Paul Cherney
Prices have rebounded to test the areas of the September highs and a balance between buyers and sellers might be forming until a company can deliver earnings which greatly exceed expectations combined with table-pounding guidance for the next quarter.
The residual positive effects of last Friday's price action are waning, but I do not have configurations of 60-minute indicators which would increase the chances for a protracted correction right now. These indicators are not flawless, but the patterns I usually see when the markets are on the edge of drop are simply not there right now.
Unfortunately, except for perhaps one more day of positive influence remaining from Friday's signals, there is little in the way of predictability in the measures I am seeing now. It is times like this when chart support and resistance become the only technical measures of the market of any potential use.
Once chart resistance is exceeded, it must be considered support until proven otherwise. Once chart support is undercut it must be considered resistance until proven otherwise.
The Nasdaq has multiple levels of resistance which might be a contributing factor to the see-saw price action. The immediate chart resistance for the Nasdaq runs 1,908-1,946.23. The thickest layers where stalls in an advance would be more likely are 1,908-1,913 and 1,925-1,937.
S&P 500 resistance is 1,032.60-1,050, based on intraday price action from June, 2003. There is a focus of resistance at 1,035-1,041. The next resistance is big at 1,048-1,107, established in March, 2002. The 1,048-1,107 resistance has especially thick price traffic (resistance) at 1,068-1,107.
Two different measures of the potential upside for the S&P 500 after the early September bullish breakout to the upside (above the 1,015 level) target 1,047 and 1,070 as potential upside prints.
Immediate intraday support for the Nasdaq is 1,892-1,877, then 1,882-1,870, which makes the 1,882-1,877 area a focus. Another layer of support is 1,856-1,827.
The Nasdaq chart has a gap in prices which runs 1,864.54-1,842.55, in the event there is aggressive profit-taking and prices move into this gap (meaning print below 1,864.54), I would expect to see accumulation taking place. There is no market law that says price gaps have to get filled.
The S&P 500 has immediate support at 1,034-1,028, and 1,026-1,014, with a focus of support at 1,023-1,018.
Cherney is chief market analyst for Standard & Poor's