A Breather for Stocks

Odds indicate that any short-term weakness will attract buyers

By Paul Cherney

The markets are consolidating the runup of the past two weeks.

Longer-term measures of daily momentum have already reached levels that keep the odds tilted to expect that any short-term weakness will attract buyers, but weakness or consolidation can last more than a single trading day. When I see configurations of end-of-day indicators like those in place now, unless or until other technical measures signal differently, I expect prices to ultimately rebound from any short-term weakness and close at higher levels than we have seen already.

The Nasdaq is testing a broad band of resistance at 1,960-2,055. The next resistance for the Nasdaq is 2,049-2,094; this overlaps the 1,960-2,055 resistance and that makes the 2,049-2,055 area another focus of resistance.

Immediate intraday Nasdaq support is 2,036.99-2,025.71, with a focus at 2,033.42-2,027.69.

S&P 500 intraday support: 1,163-1,160.52.

Immediate Nasdaq intraday resistance is 2,043.36-2,046.92. When resistance is exceeded it must be considered support until broken.

S&P 500 intraday resistance 1,168.23-1,170.87.

The S&P 500 has daily price bar resistance at 1,151-1,176.97. Next resistance is thick at 1,185-1,226.

Immediate supports (daily chart) for the S&P 500 are 1,163-1,147 and 1,150-1,127; that makes the 1,150-1,147 area a focus of support.

The Nasdaq has immediate support at 2,025-2,016 and 2,008-1,992.

A close below S&P 500 1,127 and/or Nasdaq 1,992 would be contrary to the price patterns I associate with the current technical condition of the market. In other words: I think I would be wrong about even higher prices (in the near-term) if there is an S&P 500 close under 1,127 and/or a Nasdaq close below 1,992. Price weakness that sees the S&P 500 test 1,150-1,142 and/or the Nasdaq testing 2,025-2,016 or lower cannot be ruled out and would be perfectly natural after the kind of break higher these markets have just experienced.

We are at the beginning of what has been historically, on average, the three best performing months of the year -- November through January.

Cherney is chief market analyst for Standard & Poor's

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