Short-Term Trading Ranges in Place

Upside is limited and some weakness might unfold in the beginning of October

By Paul Cherney

From Cherney Market Analysis

Right now neither the buyers nor the sellers are being aggressive and momentum measures are flat in most of the timeframes I use. The markets are caught sideways. I think the upside is limited and after the end of the month some weakness might unfold in the beginning of October, but I also think that the downside would be limited to tests of support that should hold.

The indecision in the marketplace has been exhibited right in the charts, There have been trading ranges established over the past 6 trade days and breaks above or below the trading ranges should see at least a day of movement in that same direction, but I think it is doubtful that a significant trend in prices can unfold unless there are headlines that move the masses to one side of the ship or the other.

The trading ranges are: Nasdaq 2132.60-2093.06; S&P 500 1222.56-1205.35.

The markets were relatively undamaged by the move higher in energy futures on Wednesday and maybe that suggests that a drop in energy prices could open the door for a small lift. Some end-of-the-quarter window dressing might help limit downside, too, but right now, I do not have definitive measures to guess at up or down, so it is only a break out of the trading ranges that might provide a little price movement short-term.

The lack of aggressive buying sometimes has to be resolved by a short-term washout, so if there is a break to the upside it has to produce convincing signs of participation; right now, some intermediate term 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 2124.28-2132.60, Meaningful resistance is 2155-2162.14, resistance is thick 2158-2163, resistance is formidable 2177-2186.83.

• Nasdaq immediate intraday resistance is 2122-2127.

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

• S&P 500 immediate intraday resistance is 1220-1222.56.

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 1206-1165 with a focus of support 1206-1183. This is a very strong layer of support and is expected to hold if tested again.

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Cherney is president of Cherney Market Analysis

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