The Markets Await Greenspan

Wall Street wants to hear the Fed chief hint that the central bank may consider a moratorium on rate hikes

By Paul Cherney

From Cherney Market Analysis

These are nervous markets, but they have not given up much ground and important support levels have not been tested or broken. In Wednesday's session it was a White House revision (slightly lower) in its estimates of GDP growth that rattled the intraday market.

Thursday is the day of Fed Chairman Greenspan's testimony on Capitol Hill and the markets want to hear a hint that the Fed may consider a moratorium of rate hikes. Greenspan might only observe that the Fed funds target is still shy of neutral readings, which means that Fed policy is still "accommodative for growth" and measured pace increments are still the order of the day. I do not think it is likely that Chairman Greenspan is going to blatantly accommodate the markets by suggesting that the end of this tightening cycle is at hand.

• Immediate intraday support for the Nasdaq is 2,058-2,050. The index has thick support starting at 2,043 and running to 2,027. Even if the markets are un-inspired to buy after Greenspan's testimony, the first test (IF prices move lower) of support at 2,043-2,027 should attract some buyers for a rebound. Whether that rebound attracts enough follow-through to push prices above recent highs can only be assessed when the levels of participation in the rebound are measured.

• The S&P 500 has numerous layers of support and it is usually difficult for markets to just slice through layers of support like this.

• Immediate intraday support for the S&P 500 is 1,197.39-1,191.03, there is a layer of support that overlaps at 1,194-1,185.19 which makes the 1,194-1,191.03 area a focus of intraday support. On Monday, the intraday low for the S&P 500 was 1,192.75, prices were unable to print below the 1,191.03 level.

There would be some concern for a short-term shakeout if the S&P 500 spent more than 4 minutes below the 1,185.19 level, but supports are stair-stepped and stacked, offering numerous price levels to entice buying participation. The support of 1,194-1,185.19 is overlapped at 1,187-1,180.87 which creates another focus of support 1,187-1,185.19. A move below 1,180.87 would not be healthy, and could ignite some fear driven selling, the next layer of substantial support, though, is directly underneath 1,180.87 at 1,178.87-1,165.

• Nasdaq immediate intraday resistance is 2,063.88-2,068.89 additional intraday resistance is 2,074-2,078.94 then 2,083-2,097.80, this is the most immediate intraday resistance established over the last few trade days, but immediate resistance actually runs to 2,103.45, next layer above that starts at 2,106.19 and runs to 2,116.75.

• S&P 500 immediate intraday resistance is 1,197.29-1,200.41. S&P 500 intraday resistance is stacked at 1,200.52-1,204.96. Resistance gets thick 1,206.56-1,208.85.

• The bigger picture for S&P 500 resistance is 1,205-1,217 with a focus 1,211.23-1,215.58. Next layer 1,221-1,229.11.

The current markets have demonstrated price and volume action that usually mean that there is an underlying willingness to buy, but the measures of buying and selling pressure I keep (up volume versus down volume) are no where near the levels of strength exhibited in the Q4 rally of 2004, still, though, the readings have registered thresholds that make expect that the first retracement (this is it) should attract buying interest for a rebound. I do not start to become concerned about being wrong about the willingness to buy short-term dips in price when/if 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 2,045, but I have to add that markets are not obliged to comply with my expectations for performance.

I also like to employ observations of chart support and in my view of the Nasdaq, the key chart support is 2,042-2,027. So, even if there is a close under Nasdaq 2,045, the key chart support for the Nasdaq is 2,042-2,027 and this is the area that is most likely to attract buyers (if prices were to move that low).

I still expect that sometime over the next 16 trade days, there should be an S&P 500 close at or above the 1,215.00 level and a Nasdaq close at or above 2,119. Every day the markets deliver new information that either confirms or contradicts assumptions in place: so far, I have not seen enough evidence to cause me to second guess this assumption, but if the Nasdaq posted 2 closes below 2,027, I think this would make my supposition of higher closes between now and the July 4 weekend wrong.

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

Cherney is president of Cherney Market Analysis

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