Ready for a Retreat?

Stocks have not been able to attract sufficient buying interest to push higher. There might have to be a small retrenchment

By Paul Cherney

The markets appear ripe for a retracement. Any price weakness would not change my expectations that a retracement should be limited in depth and duration. For four days the markets have not been able to attract sufficient buying interest to push higher and there might have to be a little (small) retrenchment. I expect one.

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).

I think it would be natural for prices to retrace a little and it is possible to see prints in the 1,150-1,142 area for the S&P 500 and 2,020-2,002 for the Nasdaq.

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. Tuesday's intraday high was 2,049.77, right in the focus of resistance.

Immediate intraday Nasdaq support is 2,036.99-2,025.71, with a focus at 2,033.42-2,027.69. Next intraday support is 2,020.67-2,002.

S&P 500 intraday support is 1,163-1,160.52; the next layer of organized intraday support is 1,147-1,138.50. Due to the nature of the advance, the index has multiple layers of support, but the most important ones to me look like (daily chart) 1,163-1,147 and 1,150-1,127. That makes the 1,150-1,147 area a focus of support.

Immediate Nasdaq intraday resistance is 2,043.36-2,049.77.

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

If S&P 500 1,170.87 is exceeded for more than four minutes I would guess that I am wrong about a short-term retracement occurring right now.

If Nasdaq 2,049.77 is exceeded for more than four minutes, I would guess that I am wrong about a short-term retracement.

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

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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