The Rally's Missing Ingredient

There is one glaring shortcoming in the current market lift: robust trading volume

By Paul Cherney

Measures of price momentum and volume have a positive bias. There was no great wave of volume in Friday's session and that is a little bit of a concern, but reaction to the better than expected nonfarm payrolls produced positive price action.

The S&P 500 index has closed above its immediate shelf of resistance by finishing above the 1,217.90 level. The 1,217.90 level was the most recent swing high print in the daily bar charts; it occurred on January 3, 2005. That was the most important short-term hurdle to offer some sign that higher prices could attract buyers. But the S&P 500 has resistance at 1,215-1,226.27 and judging form the timid advance on Friday, additional upside might be hard work. Above 1,226.27, the next layer of resistance is 1,240-1,286, with a focus at 1,246-1,261.

The Nasdaq composite index remains the laggard and has yet to move above its immediate shelf of resistance which ends at 2,093.68. This is somewhat of a concern, but breadth measure are positive and this should be a positive for prices.

A short-term trend of 2 to 4 trading days of net gains is likely.

Immediate resistance for the Nasdaq is substantial (many days) in the 2,068-2,111.43 area. There is a focus of resistance at 2,078-2,093.68.

For the S&P 500, immediate resistance runs 1,215-1,226.27. The close above 1,217.90 has opened the door for a test of the 1,240-1,286 area.

The S&P 500 has immediate support at 1,217-1,204, overlapped at 1,206-1,197, which makes the 1,206-1,204 are a focus of support.

The Nasdaq has immediate support at 2,064-2,048 and 2,055-2,036, which makes the 2,055-2,048 area a focus of support.

The 30-day exponential moving average of the VXO was 12.13 near the close of trading on Friday. Usually, when the VXO is above its 30-day and putting distance between itself and its 30-day, stock prices are falling, but the VXO finished Friday at 12.05, below its 30-day. This technical measure can easily shift to negative by rising. My interpretation of the VXO chart is that it should be a positive for intraday price action if the VXO moves below 11.64-11.54 area.

There is one glaring shortcoming in the current market lift: volume. Bigger total volume would increase the chances that investors, whose time horizons are greater than "intraday" or just "a few trading days," have taken an interest in putting money to work on the long side.

Anytime supports are undercut they convert to resistance until broken. Anytime resistances are exceeded, they convert to supports until proven otherwise.

Cherney is chief market analyst for Standard & Poor's

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