A Breather for the Nasdaq?

Volume measures for the index have reached a short-term overbought level that may signal price weakness on Tuesday

By Paul Cherney

This is the week of the quarterly expiration of futures (formerly known as the Triple Witch) and some price weakness on Tuesday is possible.

Sixty-minute Nasdaq volume measures have reached a short-term overbought level that usually sees price weakness the following trading day. Over the past 11 months this signal has seen lower prices on the following trade day (which, in this case, would be Tuesday, Sept. 14) 3 out of 5 times. If this does happen and there is not a significant decline (not expected), then a weak Tuesday could possibly be a set-up for selling at the open on Wednesday that fails to generate follow-through lower and prices can turn and head higher again.

So far, there is not enough evidence to doubt Friday's intraday signal and expectations for the Nasdaq to move a little higher and establish a close at least in the next layer of resistance which is 1,912-1,933.03. That should happen by Friday of this week or Monday of next week.

Immediate Nasdaq support is 1,896-1,876.

S&P 500 support is 1,123-1,117, which overlaps 1,118-1,113 making the 1,118-1,117 area a focus of support. Next support is 1,110-1,094.

Immediate resistance for the S&P 500 is 1,123-1,130.33 with a focus 1,124.60-1,127.02. This year's June price action established more formidable resistance in the 1,129-1,146.34 area with a focus of resistance 1,132-1,140.

Immediate resistance for the Nasdaq is 1,912-1,933.03 then the next area of well-defined resistance is prints of 1,960 and higher.

Cherney is chief market analyst for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal.