Another Pullback Likely

The markets might have to re-confirm buying interest at levels just below current prices

By Paul Cherney

There was no headline to account for the reversal from the highs in Thursday's session. The price action suggests to me that profit-takers are still a force to be reckoned with. The price action did confirm the strength of immediate resistance levels.

Obviously, good earnings news from market bellwethers will improve the likelihood of an advance in prices on any single day, but Friday is probably going to have to see prices retrace further and re-establish a floor.

Immediate Nasdaq support is 1902-1877 with a focus at 1,892-1,888. Additional supports are stacked due to the nature of recent price action. Next support is 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.

Immediate Nasdaq chart resistance established intraday on Thursday is 1,915-1,931; previously established resistance is 1,908-1,913.

The Nasdaq has multiple levels of resistance which I think are 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. In Thursday's session, the Nasdaq printed an intraday high of 1,936.93 before prices started to weaken.

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. If the index were to print in this 1,023-1,018 area, I think buyers would move in.

S&P 500 resistance is 1,032.60-1,050, based on intraday price action from June, 2003. There is a focus of resistance 1,035-1,041. The next resistance is big at 1,048-1,107, established in March, 2002. I have reviewed historical intraday charts and there is a small but strong layer of resistance at 1,047-1,050.11 and that is first hurdle this market is going to have to overcome.

The markets might have to re-confirm buying interest at price levels just below current levels. But eventually, there should be S&P 500 prints of 1,068-1,090 and studies I have done on the Nasdaq suggest good odds for closes in the 1,988-1,996 area before Dec. 8, 2003.

Cherney is chief market analyst for Standard & Poor's