Stocks in a Holding Pattern

There is a balance between buyers and sellers -- which leaves prices moving sideways

By Paul Cherney

Expectations for closes of 1,068 or higher for the S&P 500, and 1,988 or higher for the Nasdaq composite, both before Dec. 8, have weakened but have not become extinct.

I was wrong about a down day for both the Nasdaq and the S&P 500 on Tuesday, but there really was not enough of an improvement in volume measures to build confidence in expecting anything significant to the upside. The markets are not forming a stampede of buyers on good earnings news, but there is nothing ominous to inject a level of fearful selling either so prices are moving sideways. There is a balance between buyers and sellers.

Near the close on Tuesday, the 10-day exponential moving average of the VXO was near 19.09, any move by the VXO above it's 10-day exponential would probably coincide with pronounced price weakness in equity indexes, and a day of closing losses for the S&P 500 of greater than 1%, and something more than 1.5% for the Nasdaq would be natural (if the VXO moves above it's 10 day exponential moving average).

Immediate resistance for the Nasdaq is 1,930-1,943, then 1,937-1,966.87, with a focus at 1,945-1,959. The overlap of 1,937-1,943 represents the most immediate resistance of importance.

Immediate resistance for the S&P 500 is 1,047-1,053.79, with a focus at 1,047-1,050.11. Next resistance above 1,050.11 is 1,068-1,106, with a focus at 1,068-1,090.

Immediate Nasdaq support is 1,926-1,913 and 1,917-1,905, which makes the 1,917-1,913 area a focus of support. The next stairstep of support for the Nasdaq (under 1,905) is 1,903-1,877, with a focus at 1,894-1,888.

The S&P 500 has immediate, multi-layered supports in the 1,040.64-1,026.19 area.

Here is a reminder about what the VIX and VXO are.

On Monday, Sept. 22, 2003, the CBOE changed the contracts driving the volatility index. Up until Friday, Sept. 19, the VIX ticker symbol referenced implied volatilities of 8 OEX (S&P 100) contracts. As of Monday morning, Sept. 22, the underlying contracts and some of the calculations changed.

The VIX as of Sept. 22 switched to calculations based on S&P 500 contracts.

The CBOE wants to use the new VIX as an index and create a futures market based on its levels.

The old VIX (based on S&P 100 contracts) is still being generated but they have changed the ticker symbol to VXO (meaning VIX, Old).

You can read about the new VIX at

Cherney is chief market analyst for Standard & Poor's

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