Where Are the Bulls?
By Paul Cherney
In reviewing the end-of-day charts, there is still a slightly positive bias in place, but without signs of definitive strength or weakness, I have to defer to chart support and resistance. Right now, without some show of real buying force, I have to assume that the markets are stuck sideways until the S&P 500 index breaks above 1,217 or below 1,203. In my opinion, the Nasdaq would have to break above the 2,116.75 level, or break below the 2,074 level.
On an intraday basis: If there is a move above Nasdaq 2,103.45 or S&P 500 1,212.44, I would view these as short-term intraday positives, but I would still need to see something other than price confirming the move. I think the CBOE volatility index, or VXO, would have to be at the least below 11.10 (Wednesday's intraday low for the VXO). Also, there would have to be up volume swamping down volume on the order of 3 to 1.
And prices have to move well above the Nasdaq 2,103.45 and S&P 500 1,212.44 levels -- as a sign of aggressive buying, the prices will probably have to move quickly above 2,111-2,116.75 for the Nasdaq and 1,213-1,217 for the S&P 500 in order to expect anything more than a one day event or simply an intraday advance that fails to followthrough.
A move lower would probably gain downside momentum if the following support levels were undercut: Nasdaq 2,085-2,074.81, S&P 500 1,206.93-1,203.59.
Very near the close of trading on Tuesday, the 10-day exponential moving average for the VXO was 11.59, the 30-day was 12.30. I expect price weakness in stocks if the VXO moves above 11.59. I would guess that aggressive selling is in place if the VXO moves above 12.30. I think it would probably be a positive for stock prices if the VXO moved below 11.25, more preferably a move below 11.10 (chart read).
For the S&P 500, immediate support is 1,205-1,191.54, with a focus of support at 1,205-1,199. There is a critical layer of support at 1,190-1,185.63, if this little shelf is undercut, then I would expect to see a stairstep decline unfold. On the daily charts there is support at 1,184-1,160, inside this support are shelves. The biggest support looks like 1,178-1,163. Next support is 1,142-1,090.
On a more intermediate term basis, the Nasdaq has a band of support at 2,073-2,048 with a focus at 2,059-2,048. The next support is 2,039-2,008. The Nasdaq 2,039-2,008 area of support has a focus of support at 2,036-2,024.
The simplest way to describe the current market is that I have not seen evidence that aggressive buyers have moved into the markets, so I do not have technical evidence to strongly suggest even a short-term trend higher in prices. This has me concerned that the markets might have to retrace a little before they try to advance.
Cherney is chief market analyst for Standard & Poor's