The Market Holds Steady
By Paul Cherney
The pattern I expected to see on Wednesday, Feb. 23, did not unfold and stock prices held steady. Right now there is nothing definitive in the short-term measures I use. They have lost downside momentum and the possibility for a one or two-day rebound is real.
A rebound that lasts all day Thursday would probably have to see the Nasdaq composite index move above the 2,047 level and the S&P 500 index eclipse 1,198. On a more intermediate term basis, there is still a negative bias in place and I cannot say with any great confidence that downside is over unless there is a bigger improvement measures of accumulation.
The intraday price pattern for the Nasdaq on Wednesday did not attract aggressive sellers at the lows and it would only take a move above 2,047 to inject a level of fear in short-sided traders and create a short-squeeze.
For Thursday, a decline in oil prices or a rebound in the dollar would create an intraday atmosphere that would promote short-covering.
The Nasdaq has immediate resistance at 2,036-2,047.
The Nasdaq has had a close under 2,039.72 on Tuesday and this opens the immediate downside risk for a test of the 2,018-2,008 area. At those prices, short-term, on a first-time test basis, short-coverers will probably book profits (buy to cover which could stabilize prices and might attract other short-coverers). The Nasdaq is inside a layer of support at 2,039-2,008. Inside this shelf of support there is a focus of support at 2,036-2,024 and the Nasdaq's intraday low on Wednesday was 2,024.64, so there were buyers not willing to give prices a chance to move lower. If there is a close under 2,008, that would be another step in a downtrend and would increase concerns for a test of the next layer of support: 1,980-1,900. The support in this zone starts to thicken at 1,971-1,947.
For the S&P 500, immediate resistance is 1,191.54-1,202.48.
The S&P 500 has closed under a critical layer of support at 1,190-1,185.63, I think the chances are high for some small, stairstep movements that have a negative bias as the markets attempt to regain their feet but I would be wrong about this view in the short run if the S&P 500 managed a move above 1,209. On the daily charts there is S&P 500 support 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.
Cherney is chief market analyst for Standard & Poor's