Downside Risk Appears Limited

Weakness on Wednesday or early Thursday morning looks like it could be set-up for a rebound on Thursday

By Paul Cherney

The indexes are attempting to establish intraday bases. There might have to be more time spent moving sideways and there might have to be an intraday drop in prices on Wednesday, but downside risk appears limited and weakness on Wednesday or early Thursday morning looks like it could be set-up for a rebound on Thursday.

Since 1972, the S&P 500 has risen on the Thursday before the Good Friday holiday about 63% of the time.

Since 1972, the S&P 500 has suffered a closing loss on the Monday after Easter 72% of the time.

End of day technical measures are positive and until that changes, assume a positive trend for prices. That does not mean that every single day is a gainer.

The S&P 500 has stacked support at 1,149-1,135, then 1,135.67-1,129.94, then 1,125-1,113. Next support is 1,101-1,087.06. Immediate intraday support for the S&P 500 is a ledge at 1,145-1,141.70, and it held in Tuesday's session as the intraday low was 1,143.30.

Immediate Nasdaq support is 2,064-2,049, then 2,036-2,011; there is a focus at 2,036-2,024. The Nasdaq has a shelf of intraday support at 2,064.94-2,054.34. This level was slightly undercut in Tuesday's session as the index printed a low of 2,053.32. The index created a gap in the price chart on Friday, Apr. 2, and the gap remains open at 2,037.19-2,019.09; if prices were to drop to print inside the upper edge of this gap, it would be a likely spot for buyers to come in. During the late afternoon on Tuesday, one of my 60-minute indicators based on price did manage to hit an oversold level, so I am expecting limited downside for Wednesday and Thursday in the Nasdaq. The index has well defined daily bar chart support at 2,019-1,960.

The S&P 500 has a band of resistance at 1,149-1,176.97, with a layer of resistance inside this zone at 1,149-1,158.98. I have reviewed charts from March, 2002, and there is a well-defined layer of resistance for the S&P 500 at 1,166.27-1,173.94.

The Nasdaq resistance is 2,072-2,102. This resistance has a focus of resistance 2,072-2,091. Next resistance above 2,102 is 2,108-2,153.83. Any time resistance is exceeded it must be treated as support until proven otherwise.

Cherney is chief market analyst for Standard & Poor's