A Thursday Rebound?

Thursday should see a stabilization of prices and at least some sort of a lift would be natural

By Paul Cherney

The late-session move lower on Wednesday, June 9, to retest the intraday lows did not generate anywhere near the negative readings seen earlier in the day.

The immediate supports are so well-defined that prices should stabilize on Thursday.

The money made on Wednesday was made on the short side and booking those profits requires buying, so Thursday should see a stabilization of prices and at least some sort of a lift would be natural although the extent of those gains is questionable. Friday's market closing for former President Reagan's funeral will probably create a trading day like those ahead of a three-day weekend, thin volume when it takes few like-minded entities to push prices in any direction.

The S&P 500 printed below 1,135, but has not printed in the 1,129-1,111 area of support; that might happen early on Thursday morning. All it would take is a print under 1,930.00 to satisfy expectations that sub 1,135 prints would increase the chance for a test of immediate supports. Wednesday's intraday low print for the S&P 500 was 1,131.11.

The shelves of price action established mid-day on Wednesday represent immediate intraday resistance. Those mid-day shelves are Nasdaq 2,001-2,006.79, S&P 500 1,134.34-1,136.53. Even a move above these levels intraday might only enjoy a minor extension higher as all of Tuesday's price action represents resistance and some shorter-term traders might not feel comfortable putting on longs ahead of three days of no trading.

Probably have limited downside for tomorrow, and some sort of a lift.

S&P 500 support is 1,129-1,111.

The Nasdaq has well-defined support 1,998-1,960, this layer of support has a focus of support 1,989-1,978.

Nasdaq resistance are: the mid-day shelf from Wednesday 2,001-2,006.79, then 2,011-2,023.54, then a band 2,037-2,079, inside this band there is thick resistance 2048-2064.

S&P 500 resistances are: the mid-day shelf from Wednesday 1,134.34-1,136.53, Tuesday's 1,136.91-1,142.16, and these prices are overlapped by older resistance 1,135-1,149. The index has stacked resistance. The next layer of S&P 500 resistance is 1,149-1,176.97, with especially thick resistance 1,149-1,158.98. The March, 2002, charts show a well-defined layer of resistance for the S&P 500 at 1,166.27-1,173.94.

The CBOE volatility index, or VXO, did not put additional distance between itself and its 10-day exponential moving average on Wednesday. Late in Wednesday's session, the VXO's 10-day exponential moving average was 15.79, but just decreasing the spread (VXO moving higher) from current levels is usually not a plus for stock prices.

Intermediate term measures which include measures of up volume/down volume, NYSE breadth and price momentum have achieved levels which usually mean that there is additional upside to come, although it does not mean that it will occur in a straight line ascent.

Historic studies of price action in presidential election year Junes suggest that there is probably more to the upside, although prices probably will not end the month at their highest level for the month.

Cherney is chief market analyst for Standard & Poor's