Downside Risk Appears Limited
By Paul Cherney
Some of Thursday's price action (to the upside) was probably the product of nervous bears covering outstanding short positions, scared into covering after the bullish interpretation of the minutes from the Fed's Oct. 28 meeting. That short-sided buying interest is probably finished for Friday and there could easily be a little downside pressure and some profit-taking ahead of the weekend, but immediate downside risk appears limited.
Seasonal strength and strong hands on the long-side suggest that a majority of the investors are probably more willing to risk a day of retracement (potentially tomorrow) and maintain long positions in anticipation of additional upside before the end of the year.
Even though market measures did not reach oversold levels seen at previous swing lows, downside risk appears limited and prices should try to work a little higher. It would not be a surprise though to see prices make a small dip on Friday, even closing with a loss on the day.
Immediate Nasdaq resistance starts to get thick at 1,956 and higher. Resistance becomes very thick at 1,966-1,978, but runs all the way to 2,011.25.
Immediate Nasdaq chart support is 1,931-1,923.09. More substantial support, which stemmed the decline in prices on Wednesday, is 1,916-1,878 with a focus at 1,907-1,896.
The S&P 500 has a brick wall of resistance at 1,068-1,090.
Immediate support for the S&P 500 is 1,068-1,065; more substantial support, which held during Wednesday's decline, is 1,060-1,052.
Cherney is chief market analyst for Standard & Poor's