Will the Selling Subside?

The markets remain hostage to oil prices and weak guidance from tech-related companies

By Paul Cherney

Last Friday's (Aug. 6) closes were 1,776.89 for the Nasdaq and 1,063.97 for the S&P 500. Closing levels for Thursday, Aug. 12, have satisfied the chart pattern expectation for closes that undercut the closes of last Friday. That is just the chart pattern that usually unfolds after readings similar to last Friday's. Unfortunately, there is nothing predictive in the fact that this pattern has been completed.

The markets remain hostage to oil prices and weak guidance from tech-related companies.

I do not have solid indications in the measures that the sellers are giving up, but on a chart basis, I think if the Nasdaq were to start printing in the 1744-1734 area, that looks like a natural spot on the chart (on a first test) for some buying to occur, even though the buying might only be bears booking short-sided profits.

A drop in oil prices should help encourage some buying, too.

Immediate intraday resistance for the Nasdaq is 1,760.60-1,767.55, S&P 500 1,066.99-1,071.21.

Intraday resistances are stacked: Nasdaq 1,769.72-1,774.68, S&P 500 1,071.90-1,073.73. When prices move above resistance it is a positive sign.

A shakeout might offer the bears a more profitable exit from short positions and that could be a catalyst for a short-term bounce.

Many people are waiting for fear-driven selling and huge volumes to signal some sort of a selling capitulation, but these markets continue to make the sidelines look comfortable so huge volume would be a surprise.

Intermediate-term indicators are very close to oversold readings that often produce a bounce, but it is the internal measures in the trading days after the bounce that might offer some indication of the ability of the markets to put more than two trade days of gains together. So far, I have no readings suggesting that there is valid accumulation taking place.

The Nasdaq index has two immediate concentrations of support inside the longer-term layer of support of 1,776-1,600. They are 1,744.60-1,675 and 1771-1734. This makes the 1,744.60-1,734 area a focus of support.

S&P 500 support is 1,046-1,030 with a focus at 1,060-1,046.

There are two gaps in the Nasdaq's charts (intraday bars): 1,786.65-1,801.88 and 1,806.28-1,820.21.

Besides the intraday resistance mentioned above, additional resistance levels for the S&P 500 are 1,075.85-1,079.04, then 1,086-1,092, then 1,103-1,109.30, 1,114-1,119.60, stacked and overlapped at 1,118.56-1,122.37.

Cherney is chief market analyst for Standard & Poor's

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