Short-Term Oversold

The markets are short-term oversold on several measures and a small rebound in prices is likely

By Paul Cherney

From Cherney Market Analysis

Pay no attention to the volume generated today, this was a Monday in the summer.

In the short-term, the markets are now registering oversold measures that can precede a bounce.

I still think the markets have the tendency to drift lower to test the supports starting at S&P 500 1206, NASDAQ 2106. BUT with Friday's end of day data, the markets are short-term oversold on several measures and a small rebound in prices is likely. This creates the possibility for some sideways with a positive bias for a few trade days. Obviously, a drop in oil prices would increase the potential for short-term gains.

There still is some vulnerability in the very short-term (like Tuesday) for a one day drop. I do not think that will happen, but if that were to happen, I think it would be just a short-term capitulation that would lead to a rebound or a period of stabilization.

Both the NASDAQ and the S&P 500 have already had closes below price levels that suggest to me weaker prices for a test of supports S&P 500 1206-1183 and NASDAQ 2106-2076, and unless I see a close in the S&P 500 over 1245 or a close in the NASDAQ over 2195, I will expect some sort of a drift lower. The supports mentioned are not that far from current prices.

I would start to become concerned that my expectations for a drift lower are wrong if the S&P 500 managed to produce a close above 1236.24 or the NASDAQ managed a close over 2174.55.

Right now, we are in the summer doldrums when thin volume can see flat trade or volatile trade. At this time I do not think that there can be a big downdraft unless there is a headline of undeniably bearish importance. I do not think that a drop to 1206 or slightly lower for the S&P 500 or 2106 for the NASDAQ constitutes a "big drop."


• NASDAQ immediate intraday resistance is a shelf 2139-2143.92, stacked at 2146.49-2157.98 (focus 2151-2158). Then 2165-2185.91, resistance gets thick 2177.85 and higher. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.

• S&P 500 intraday resistance is a shelf 1222.50-1225.08, there is another shelf of resistance 1222.64-1227.61 Resistance is stacked and formidable at 1229-1239.76. A combination of several intraday plateaus creates a focus of resistance at 1238-1242.62, but resistance runs all the way 1245.81. The next focus of resistance above 1245 is 1249.23-1267.


• NASDAQ immediate intraday support is 2135.69-2122.86. The next well-defined layer of support is 2106-2039 with a focus of support 2106-2076 (very strong and should hold if tested).

• The S&P 500 has immediate intraday support in the form of a thin shelf 1219-1215. The next meaningful support for the S&P 500 is 1206-1165 with a focus of support 1206-1183 (very strong and should hold if tested).

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

Before it's here, it's on the Bloomberg Terminal.