Some Positive Signals for Stocks

But there could be cautious, small-range trading ahead of Friday's jobs report

By Paul Cherney

Sixty-minute measures for both the Nasdaq and the S&P 500 ended the Tuesday, June 1, session in configurations which can precede roughly 3 to 5 hours of choppy trade that usually carries a positive bias.

The May employment report is due to be released on Friday. Quite often, there can be cautious, small range trading on the Thursday ahead of the report, so, tomorrow (Wednesday), might be the last chance ahead of the report for the bulls to advance prices.

On May 25, 2004, there was a bullish price breakout of a short-term trading range. A measurement of the Nasdaq price range of 1,865 to 1,938 -- 73 points -- added to the 1,938 level equals 2,011; this calculation is how some chartists would create an upside target for the Nasdaq if there is going to be a successful run after Tuesday's bullish breakout. The same calculation performed on the S&P 500 would equate to an S&P 500 level of 1,136. There has not been sufficient contrary evidence to suggest that these target assumptions are unattainable. There is no time schedule for these targets.

Immediate intraday resistance for the Nasdaq is 1,989-2,009.11.

Immediate support for the Nasdaq is 1,975.66-1,967.40, which represents a focus of support. There is another layer of support at 1,971-1,957.58. That makes the 1,971-1,967.40 area thick support. Additional supports under 1,957 are 1,951-1,945, then 1,934-1,913.73, then 1,918.08-1,899.85, with a shelf of support at 1,918-1,914.

Immediate intraday resistance for the S&P 500 is 1,116-1,129.25. The S&P 500's next layer of resistance above 1,116-1,129.25 is 1,135-1,149.

Immediate intraday support for the S&P 500 is 1,116.71-1,109.91, with a focus inside this zone at 1,116-1,112.71. The index has a small shelf at 1,109.04-1,106.10, then substantial support at 1,100.72-1,090.74.

If there is a retracement into Tuesday's price range (May 24), it would be a sign of a strong market if buying support became obvious well above the 50% retracement of the daily range. That would mean prices should preferably attract buyers before prints of (roughly) 1,938 for the Nasdaq and 1,101 for the S&P 500. So far, there has been no appreciable weakness.

During retracements, truly bullish markets often only approach support zones without printing inside them because buyers are so aggressive that they are satisfied with buying at any price cheaper than the previous print.

Cherney is chief market analyst for Standard & Poor's

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