Conditions Still Positive for Stocks

But technical signals point to sideways price traffic for the S&P 500 for a few trading days

By Paul Cherney

Nasdaq prices dropped on Wednesday, Apr. 7, and printed within 1.55 points of the top of the price gap (2,037.19-2,019.09). Buyers came to the marketplace and prevented prices from spending the whole day working lower. It was not the best price action because the intraday rebound failed to sustain buying interest and prices rolled over before the close.

End-of-day technical measures are still positive but in Tuesday night's overnight systems run, a signal was issued which usually sees sideways price traffic for a few trading days (for the S&P 500).

The possibility of one day up and one day down appears high for the S&P 500; since 1972, the S&P 500 has risen on the Thursday before the Good Friday holiday about 63% of the time. But the S&P 500 has suffered a closing loss on the Monday after Easter 72% of the time since 1972.

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. If the index were to close below 1,135.00, I think it would create immediate downside risk for a close 1% to 2% lower.

Immediate Nasdaq support is 2,064-2,049, then 2,036-2,011; there is a focus at 2,036-2,024. 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. The index has well defined daily bar chart support at 2,019-1,960.

The S&P 500 has immediate intraday resistance at 1,141.70-1,145. The index has a well-defined (strong) 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 has immediate intraday resistance at 2,054.34-2,064.94. The bigger Nasdaq resistance is 2,072-2,102. This resistance has a focus of resistance at 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. Anytime supports are undercut they must be considered resistance until proven otherwise.

Cherney is chief market analyst for Standard & Poor's