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http://www.businessweek.com/stories/2004-02-26/stuck-in-a-trading-range

Markets & Finance

Stuck in a Trading Range


By Paul Cherney Indicators are still mixed, but, on balance, there is a positive bias for prices. The risk of another couple of days of a dip cannot be ruled out but downside appears limited and upside is probably going to be a tough row to hoe, but with the technical measures in place right now, assume prices will edge higher for the S&P 500 until something changes. The Nasdaq is not looking very strong at all and weakness in this index might drag the S&P 500 lower. I believe we are in a trading range.

Immediate Nasdaq

support is 2,024-2,012, overlapping 2,014-2,005, and the bigger band established over the months of October, November and December, 2003, of 2,007-1,959; there is a focus of support at 2,001-1,996. Next support is 1,980-1,959. I now think I was wrong to expect Nasdaq prints of 1,982-1,970 -- the recent low pass was 1,991 -- but if there are a couple of days of weakness, the 1,982-1,970 area looks like a likely reversal point.

Immediate support for the S&P 500 is still 1,147-1,138.62. Next support is 1,129-1,124.

Nasdaq immediate chart

resistance is 2,026-2,051, overlapping at 2,049-2,062.48, then 2,072-2,094.92. This resistance actually goes all the way to 2,102. There is a focus of resistance at 2,072-2,091. Next resistance above 2,102 is 2,108-2,153.83.

The next layer of chart resistance for the S&P 500 is 1,149-1,176.97, with a layer of resistance inside this zone at 1,149-1,158.98.

I think upside will be a struggle for the next couple of trading days. Volume is in line with a market which has not committed to one side or the other.

The CBOE volatility index, or VXO (VXO.X), is below its 10-day exponential

moving average, which I interpret as a background positive for prices. Here's a reminder: the VXO measures implied volatility, and the lower the number, the smaller the expectations for price moves. Low volatility means lackluster, anemic price moves.

Very near the end of trading on Friday, Feb. 27, the 10-day exponential moving average of the VXO was 15.65. Cherney is chief market analyst for Standard & Poor's


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