The $70 Question

Will crude reach that level? If it does, it might cause short-term profit-taking in oil -- which would in turn ignite buying in equities

By Paul Cherney

From Cherney Market Analysis

Maybe oil has to print $70.00 to force some short-term profit-taking (in oil) which would in turn ignite some buying in equity indexes. I think a scenario like this would favor a stronger rebound in the Nasdaq rather than the S&P 500, because if oil prints $70.00 and attracts aggressive sellers (for short-term profit-taking in oil), that is going to be reflected in the stocks of oil related companies, and many of them are in the S&P 500, their weakness can hobble a rebound in the S&P 500.

I still think the markets should drift lower to test S&P 500 1206-1183 and Nasdaq 2106-1076. I would begin to think I was wrong moves to these levels if there was a close in the S&P 500 over 1239 or a close in the Nasdaq over 2175. Friday's end of day data, that issued short-term oversold readings, were simply wrong, the victim of an oil price spike to $67.32 (contract settlement for Wednesday).

These markets are not giving points up in a panicked way, it has been a drift lower. I don't expect prices to just tag the support levels and then rebound in a rocket-shot higher. I like to see some sort of a sign of capitulation. Some sort of an extreme reading that suggests that some portion of the investing public has thrown in the towel. Readings like that might be hard to come by during this summer vacation period.

Immediate Resistances:

• Nasdaq immediate intraday resistance is a shelf 2139-2145.71, stacked at 2146.49-2157.98, the focus of resistance is 2151-2158 and it represented the ceiling for prices today. Today's intraday high print for the Nasdaq was 2156.13. Next resistance 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 1215-1224, overlapped at 1222.50-1225.08, there is another shelf of resistance 1222.64-1227.61. Focus of resistance generated by overlapping ranges is 1222.50-1225.08. 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.

Immediate Supports:

• 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 on first test).

• The S&P 500 has immediate support 1206-1165 with a focus of support 1206-1183 (very strong and should hold on a first test).

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Cherney is president of Cherney Market Analysis

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