Maintaining Positive Outlook

The market has potential for additional gains, though oil prices remain a wild card

By Paul Cherney

From Cherney Market Analysis

The technical conditions have not changed. The strength demonstrated by price and volume momentum in the lift from Thursday's lows usually has a lingering positive effect. I think there is potential for additional gains.

Oil remains a wild card, I just accept that "wild card" aspect of oil as a risk of the markets right now. I think crude oil prices would have to move above $61.50 to really hurt the equity indexes.

In an intermediate term (the next as few as 2 or as many as 7 trade days), I expect the dominant tone of the markets to remain positive. It is next week, after the July expirations, when my concerns about a lack of attendance start to rise. Earnings reports should keep interest in place until closer to Friday, July 22, but summer vacations are coming in August and I am concerned that once the bulk of earnings are out of the way, markets might not be able to push much higher than the levels established later this week or early next week.

June CPI and June Retail Sales will be reported at 8:30 a.m. on Thursday. This is a little unique, because usually PPI is reported before CPI, but this week, PPI will not be reported until Friday.

The street expects June CPI to be up 0.2% or 0.3%. The core CPI is expected to be up 0.1% or 0.2%. I think the numbers would have to be big surprises on the upside to rattle the markets. The markets know that the Fed is going to continue to mechanically raise rates. I think the markets have shifted focus and can move higher on signs of strength, so unless CPI is a huge surprise, I think the markets will be looking for signs of strength in the Retail Sales.

The Street expects June retail sales to be up 0.9% to up 1.0%, ex-auto up 0.5%.

Immediate intraday resistance, established Wednesday: S&P 500, 1223.87-1225.54; Nasdaq, 2145.09-2149.78.

Immediate intraday supports: Nasdaq support is 2137-2124.88; S&P 500 has immediate intraday support at 1220-1214. I expect these supports to hold if tested.

Resistances: In addition to the intraday resistance established on Wednesday, the Nasdaq has a focus of resistance at 2150-2154, this is an overlap of two layers of resistance at 2134-2154 and 2150-2165, A bullish short-term event would be a gap above 2154 at an open. If that were to happen, I would expect a test of the next layer of resistance 2170.99-2192.

The S&P 500 has immediate intraday resistance at 1224-1229.11. The index tested this level in Tuesday's trading by printing a high of 1225.54. A close above 1229.11 would be a short-term bullish move, next resistance is from all the way back in the spring of 2001 at 1232-1286.62 with a focus of resistance 1255-1267. A short-term bullish event for the S&P 500 would be an opening lift that pushes prices past the 1229.11 in the first few minutes of trading. This would increase the chances for a test of the 1255-1267 area of resistance over the following 3 to 5 trade days.

Supports: Nasdaq support is 2137-2124.88; the next support is 2106-2085. S&P 500 has immediate intraday support at 1220-1214, and a layer of thick support at 1212.19-1207.79

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Cherney is president of Cherney Market Analysis

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