Oversold? Not Quite

Weaker oil prices would help to buoy the market -- and some end-of-the-quarter window dressing might help limit downside

By Paul Cherney

From Cherney Market Analysis

NYSE breadth measures issued oversold signals, but Tuesday was a day that should have seen a solid advance in prices so I have to consider the signal a failure.

These signals usually mean a few days of choppy trading with potential for some minor gains and some minor gains can still unfold, weaker oil prices would help to buoy the market and some end-of-the-quarter window dressing might help limit downside, but the bigger problem for the current markets is that other measures I run are currently building evidence to suggest that even if there is a small lift in prices, there should be a loss of upside momentum and lower prices (prices that will probably undercut the recent lows) should unfold.

Immediate Resistances:

• The Nasdaq has intraday resistance at 2124.28-2132.60, Meaningful resistance is 2155-2162.14, resistance is thick at 2158-2163, and is formidable at 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 immediate intraday support is 2114-2099.

• 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 (if tested again). Inside this zone is a focus of measures in the 2087-2072 area and prints inside this area should compel short covering which can easily lead to a more protracted rise.

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

Disclaimer: Use of the information provided by Cherney Market Analysis, Inc., is subject to the Terms of Use contained on its website, paulcherney.com.

Cherney is president of Cherney Market Analysis

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