Stocks Over a Barrel
By Paul Cherney
Oil prices on Friday will probably dictate trade in the equity markets. Minor moves in oil (less than 40 or 50 cents per barrel in either direction) are probably not going to cause much price movement in the equity indexes. If that is the case (less than a 50 cent move in either direction for oil), I think Friday has great potential to be similar to Thursday, basically flat, low volume trade with a slightly positive bias.
I think these views still have validity: Maybe oil has to print $70 to force some short-term profit-taking (in oil) which would in turn ignite some buying in equity indexes. A scenario like this would favor a stronger rebound in the Nasdaq rather than the S&P 500, because if oil prints $70 and attracts aggressive sellers (for short-term profit-taking in oil), that is going to be reflected in the stocks of oil related companies (short-term profit-taking), and many of them are in the S&P 500, their weakness could hobble a rebound in the S&P 500.
I still think the markets should drift lower to test S&P 500 1206-1183, Nasdaq 2106-1076. I would begin to think I was wrong if the S&P 500 closed over 1239 or if the Nasdaq closed over 2175.
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 would 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, and if oil just continues to edge higher I think it will weigh on stock market sentiment and create bigger potential for a selling capitulation.
Nasdaq immediate intraday resistance is a shelf 2139-2145.71, stacked at 2146.49-2157.98, the focus of resistance is 2151-2158. 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 1215-1219 then 1222.50-1225.08, and 1222.64-1227.61. A focus of resistance is created by the overlapping ranges at 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.
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).
Cherney is president of Cherney Market Analysis