A Bullish Break for the Nasdaq

The index's move above key resistance has opened the upside for additional gains

By Paul Cherney

From Cherney Market Analysis

The Nasdaq index has closed above key resistance and this has opened the upside for additional gains. Historically, when the Nasdaq is outpacing the S&P 500, both indexes tend to have gains. I expect the markets to work higher, but that does not mean that every day is a gainer.

The Nasdaq has resistance at 1,989-2,007.24. Resistance is thick above 2,007 and the resistance runs all the way to 2,021.82. Next resistance is 2,037-2,100, with a focus at 2,042-2,065.

The S&P 500 has an immediate hurdle to close above a shelf of resistance at 1,166.65-1,173.30. Next resistance is key resistance at 1,178-1,184.70. Monday's total volume was not impressive, but the relationship between up volume and down volume at the NYSE was a positive. The price trend for the S&P 500 remains technically negative because overhead resistance remains unbroken, but it was the Nasdaq that led on the way down and it appears to be leading on the way up. The Nasdaq has produced enough signs of buying interest that the benefit of the doubt is on the side of higher prices.

Immediate intraday supports established on Monday are:

• Nasdaq 1988-1982.42. Supports are stacked 1985-1972.71. It would NOT be healthy to see prices undercut 1972.71.

• S&P 500 immediate intraday support is 1162-1156.27.

Monday was a relatively low volume day. This is option expiration week and I would expect that there should be a down day either Tuesday or Wednesday.

On Tuesday, the markets will have to digest the 8:30 a.m. ET releases of April PPI (the Street expects a rise of 0.4%), April Housing Starts (the Street expects near 1.99 million annualized rate), and April Building Permits, then at 9:15 a.m., Industrial Production and Capacity Utilization. Right now it is a challenge to project what combination of fundamental news headlines the buyers would react to the most aggressively, logic suggests that bulls would want to see low inflation and signs of economic strength, but sometimes it is dangerous applying logic to the markets.

The S&P 500 has a formidable wall of resistance at 1,166-1,173.30. Key resistance is at 1,178-1,184.70. The next resistance above that is 1,198-1,215. In this area, resistance gets thick with prints 1,205 and higher.

The Nasdaq has resistance 1,989-2,021.82, but inside this resistance there is an especially well-defined (strong) layer of resistance at 1,989-2,007.24.

S&P 500 support is considerable (strong) at 1,160-1,136. Additional support is 1,142-1,102. A test of the 1,142-1,132 area would probably produce a short-term rebound.

The Nasdaq has considerable support at 1,959-1,889, with a strong layer of support at 1,960-1,943.89.

Immediate focuses of support for the S&P 500 include 1,160-1,154, then 1,142-1,132.

Disclaimer: Use of the information provided by Cherney Market Analysis, Inc., is subject to the Terms of Use contained on its website, paulcherney.com.

Cherney is president of Cherney Market Analysis

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