Bargain Hunters Emerge
By Paul Cherney
The intraday price pattern on Wednesday proved that there are buyers interested in bargains near S&P 500 1960 and Nasdaq prices 1950 and lower.
Wednesday's price and volume action was not enough to push measures of buying demand versus selling pressure to levels that would increase the chances for an extension higher, but they have improved. Technically, I rate the volume measures for both the Nasdaq and the S&P 500 as neutral, which is neither bullish nor bearish. There was nothing overtly negative in the measures on Tuesday and there was nothing overtly negative in the measures on Wednesday, but the thresholds I watch, thresholds that would increase the odds for an extension higher, are a considerable distance above current readings (daily bars).
There are trading days when, out of nowhere, the buyers won't stop buying, regardless of price, and a day like that can shove buying demand measures to levels that increase the odds for follow-through over multiple trading days. It would probably take a day and a half of aggressive buying to produce levels like that for the current markets.
Intraday price action on Wednesday was short-term positive and can easily produce a higher opening and first 30 minutes prices at the open tomorrow, but total trading volume measures remain suspect.
Continued weakness in oil prices can be a positive for the markets just as it was at the end of October, 2004.
Key short-term resistance levels remain S&P 500 1,178-1,184.70, Nasdaq 1,970-1,981.45.
It would take an S&P 500 close above key resistance at 1,178-1,184.70 to force prices higher. It would take a Nasdaq close above 1,981.45.
The Nasdaq has considerable support at 1,959-1,889. The S&P 500 has considerable support at 1,163-1,136 and even if there is a decline in prices, these areas have great potential to see prices just meander sideways waiting for buyers to re-group in response to signs of lower inflation.
The S&P 500 has immediate intraday resistance at 1,166-1,173.30, and then a key resistance level at 1,178-1,184.70. Next resistance is 1,198-1,215. In this area, resistance gets thick with prints 1205 and higher.
The Nasdaq has key resistance at 1,970-1,981.45. On the daily chart, resistance for the Nasdaq is 1,968-2,021.82, but inside this resistance there is an especially well-defined (strong) layer of resistance at 1,989-2,007.24. The Nasdaq's immediate obstacle is to move above the 1,981.45 level to force additional buying interest.
Once resistance levels are exceeded, they convert to support until proven otherwise. Once support levels are undercut they convert to resistance.
Immediate intraday support for the Nasdaq is 1,960-1,943.89, intraday support is thick at 1,959-1,947.
S&P 500 support is considerable (strong) at 1,164.80-1,136, support is especially thick (strong) with prints 1,960 and lower. Additional support is 1,142-1,102.
Cherney is president of Cherney Market Analysis