By Paul Cherney
The markets are stuck in trading ranges. The trading ranges, based on end-of-day data, look like this:
• S&P 500: Top of the most recent range, 1,158.98; bottom of the range, 1,122.38;
• Nasdaq: Recently established trading range is 2,094.92 at the top, 1,991.05 at the bottom.
Due to the thick price traffic established in the Nasdaq during the October, November, December timeframe, it is not likely that index can just plunge.
More sideways trading ahead of Friday's employment report is a good possibility for Thursday. Until I can see something definitive in the end of day measures or the 60-minute measures, I don't have a reliable guess as to where prices might be headed. These markets are stuck in trading ranges for now.
Nasdaq indicators based on end-of-day measures are neutral with a slightly negative bias. The index was unable to close below 2,032 on Wednesday, which suggests that there are still people willing to buy, not sell.
Under these conditions, if chart supports do not hold, and the following levels are undercut, then chances increase for some volatility and lower prices to follow.
Well-defined support (strong) for the Nasdaq (intraday) is 2,045-2,032.
S&P 500 support is 1,150-1,141.80. A retest of the bottom edge of the trading range would become more likely if the index were to close below 1,134.43 (a recent swing low).
Momentum measures are in neutral.
Immediate Nasdaq support is 2,045-2,032 then 2,024-2,012, overlapping 2,014-2,005. On Wednesday, the Nasdaq printed a low of 2,020.29 and buyers re-entered the market. The bigger band of support established over the months of October, November and December, 2003, is 2,007-1,959; there is a focus of support at 2,001-1,996. Next support is 1,980-1,959. This looks like very strong support which should not break.
Immediate support for the S&P 500 is 1,150-1,141.80, overlapped at 1,147-1,138.62, which makes the 1,147-1,141.80 area a focus of support. That is where the intraday low for the S&P 500 was on Wednesday: 1,143.78. Next support is 1,129-1,124.
Nasdaq immediate chart resistance is 2,049-2,062.48, then 2,072-2,094.92. This resistance actually goes all the way to 2,102; there is a focus of resistance at 2,072-2,091. Next resistance above 2,102 is 2,108-2,153.83.
The next layer of chart resistance for the S&P 500 is 1,149-1,176.97, with a layer of resistance inside this zone at 1,149-1,158.98.
The CBOE volatility index, or VXO, is still below its 10-day exponential moving average, which I interpret as a background positive for prices. Very near the end of trading on Wednesday, Mar. 3, the 10-day exponential moving average of the VXO was 15.01.
Cherney is chief market analyst for Standard & Poor's