Stocks May Stay in Neutral

Headline reactions to Hurricane Rita are the wild card for the markets

By Paul Cherney

From Cherney Market Analysis

It is still my expectation that the immediate levels of support will hold. I just have not seen enough signs that the sellers have tossed in the towel, or that the buyers are becoming aggressive. There is usually a basing process that has to play-out and right now I do not think that process has completed yet.

This is a difficult market to call. Why? Because I have already had signals I rely on pretty heavily that suggest that there has to be a basing process, and that would mean another couple of days. But I also recognize the potential for headline relief from a Rita that does little or no damage. I have to go with the technicals.

I have doubts that any Rita Relief lift will generate a significant trend higher for equity prices. Yes, there can be a few days of a lift, but there will probably have to be something else, like a "we're ready to do what is necessary to insure economic growth" statement from the Federal Reserve, to produce a real lift.

On a purely technical basis, more basing is what would be expected, but obviously, headline reactions to Rita are the wild-card that allow for some upside.

I think I would be wrong about a short-term basing process if the S&P 500 managed a close above 1231.27, Nasdaq 2162.14.

Immediate Resistances:

• The Nasdaq has intraday resistance 2118.13-2139.17, then important resistance 2155-2162.14, resistance is thick 2158-2163, resistance is formidable 2177-2186.83.

• S&P 500 intraday resistance is 1218.99-1225.61 then 1232.15-1236.49. The index has formidable resistance at 1229-1242.62.

Immediate Supports:

• Nasdaq major support is 2106-2039, and it is a critical support, that, if broken would open the downside for sub 2000 prints. I expect this level (2106-2039) to hold. Inside the 2106-2039 support layer, there is a focus of support 2106-2072 and this is still a likely spot for the markets to make a stand. Inside this zone is a focus of measures 2087-2072 and prints inside this area should compel short covering.

• The S&P 500 has well-defined support 1206-1165 with a focus of support 1206-1183. This is a very strong layer of support and is expected to hold.

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

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