Positive Bias Remains in Place
By Paul Cherney
There is little that has changed since yesterday. There has been no breakdown in prices. I think the S&P 500 is at or near an area on the chart that could mean limited upside and the potential for some profit-taking, but until there are some valid signs of broken support (even just immediate supports) or some other blatantly bearish signals, a positive bias remains in place.
Thursday is the day before an Employment Report and sometimes these trade days can be boringly sideways, as big money balances itself ahead of the report.
As I have mentioned previously, I would become concerned about a shift toward profit-taking if the Nasdaq posted a close under 2165.44. The index has a focus of support at 2167-2165.44. A close below 2184 would probably force a test of the 2175-2165 area, but the first test of this area should probably produce a bounce. Nasdaq 2167-2165.44 was established as a floor for prices July 22 through July 27. It is an important layer of support because these prices are where buyers have consistently bought the market and pushed it higher; if there is a Nasdaq close below this area, that would suggest to me that a shift in sentiment has occurred (because if prices closed below 2165.44, it would mean that people are no longer willing to take a long-sided chance at those levels.) For the S&P 500, I would become concerned about a shift in sentiment if the index posted a close below 1219.80.
Immediate Intraday Resistances:
• Nasdaq immediate resistance is 2211-2249 with a focus at 2211-2233.33; resistance gets thick at 2225-2233. Please understand that the longer back in time you pull the prices for support or resistance, the less precise they are because the most immediate price action carries the most immediate importance. The prices I am using for resistance are based on intraday charts from May and June in 2001, a little more than 4 years ago.
• S&P 500 intraday resistance is 1240.90-1245.81. The next focus of resistance above 1245 is 1249.23-1267. This area looks like a natural stopping point to me, but the markets would have to break supports or issue some other technical evidence of weakness to suggest that this area was a short-term top. Prices can still move into this zone, some choppy, uncertain trading might occur after that.
Immediate Intraday Supports:
• Nasdaq support is a small shelf at 2214-2207.79, then 2201-2184.74. Supports are stacked; it is usually difficult for prices to drop through stacked support unless there is a headline of undeniably bearish (or sentimental) impact. Next supports are 2189-2182 and 2175-2165.44, overlapped at 2167-2144.78.
• The S&P 500 has immediate intraday support at 1239.04-1230, overlapped at 1231.79-1223.03, which creates a focus of support at 1231.79-1230.00. There is a thin shelf at 1219-1215; the next meaningful support is 1206-1183.
• S&P 500 resistance is 1232-1286.62, with a focus of resistance at 1249.23-1267.
• For the Nasdaq daily charts, resistance becomes thick at 2263.75-2328.05.
Cherney is president of Cherney Market Analysis