A Holding Pattern for Stocks

Intermediate term indicators are neutral. The markets await Friday's employment report

By Paul Cherney

Stocks are probably in a holding pattern until the employment report on Friday, Apr. 2.

A report of interest on Thursday will be the ISM index for March, due to be reported at 10:00 am EST. In Wednesday's market, a weaker than expected employment index in the Chicago PMI invited a round of intraday selling. If the ISM index disappoints, weakness which does not really attract much buying might follow, lower prices fed by fears of another disappointing nonfarm payrolls number on Friday.

It will probably take a nonfarm payrolls gain of at least 120,000, preferably 150,000 or higher to ignite buying and short-covering. If the number disappoints, downside still looks limited but indigestion might keep sellers in control for three to five trading days and immediate downside risk for losses of 2% to 5% could easily unfold.

Intermediate term indicators are neutral.

The S&P 500 has immediate support at 1,125-1,113. Next support is 1,101-1,087.06, then substantial, well-defined support at 1,077-1,031, which is expected to hold if tested.

The S&P 500 has a layer of resistance at 1,129-1,133, but the next layer of well defined resistance is not until 1,135-1,149, with a focus at 1,138-1,146.65.

Immediate Nasdaq resistance becomes thick at 2,011-2,064; a move into this area without a robust nonfarms number would probably attract sellers.

The following price levels carry some short-term significance because if they are undercut for more than 4 minutes intraday, without attracting buyers, I would interpret that as a sign that part of the buying fuel which forced prices higher has converted to profit-taking. These are the important immediate intraday support levels: S&P 500, 1,114.06-1,111.75; Nasdaq, 1,980-1,975.43.

Cherney is chief market analyst for Standard & Poor's

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