Bulls Take a Breather
By Paul Cherney
There has not been a great change in the technical conditions of the markets. In the short term, sideways trading and a small retracement would be natural, but the more intermediate term measures of price and volume (especially for the Nasdaq index) have already registered levels that suggest to me that the first retracement from current levels should attract buying interest for a rebound.
The lack of total trading volume remains a concern, but this is the time of the year when lower trading volume is common. I do not start to become concerned about being wrong about the willingness to buy short-term dips in price unless or until the Nasdaq posts a close that represents a loss of 2.5% from its highest close. For the current market, that would be equivalent to a Nasdaq close under 2023.84.
Historically, when the Nasdaq is outperforming the S&P 500, both indexes benefit, and that is the case right now.
Technical Support Levels
• Nasdaq immediate intraday support is 2,069.10-2,064.89, then 2,062.94-2,057.80. Next support is 2,051-2,035.30, overlapped at 2,042.68-2,027.48, which creates a focus of support at 2,042.68-2,035.30. The index has especially well-defined support at 2,034-2,027.48. Strong markets should not have to retrace very far to find aggressive buyers.
• The S&P 500 has a shelf of good intraday support at 1,191.23-1,187.66.
• The S&P 500 has numerous layers of support. Immediate S&P 500 support is 1,194-1,185.19. There would be some concern for a short-term shake-out if the S&P 500 spent more than 4 minutes below the 1,185.19 level. Supports are stair-stepped and stacked and it is usually difficult for prices to just slice through supports like these. Support is overlapped at 1,187-1,180.87, which creates a focus of support at 1,187-1,185.19. A move below 1,180.87 would not be healthy (nor expected short-term), the next layer of substantial support, though, is directly underneath 1,180.87 at 1,178.87-1,165.
Technical Resistance Levels
• The Nasdaq resistance is 2,075-2,103.45 with a focus at 2,083-2,093. Resistance starts to thicken with prints 2,073 and higher.
• Immediate intraday resistance for the Nasdaq becomes especially well-defined (strong resistance) at 2,074.68-2,076.80.
• Immediate resistance for the S&P 500 is 1,198-1,229.11. Resistance starts to thicken at 1,199.40-1,202. The next focus of resistance is 1,205-1,215.
• Immediate intraday resistance for the S&P 500 becomes thick at 1,196.32-1,199.56.
Anytime supports are undercut, they convert to resistance until proven otherwise by price action.
Anytime resistance is broken, it converts to support until proven otherwise by price action.
Cherney is president of Cherney Market Analysis