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By Paul Cherney The CBOE's Equity Only P/C ratio as of 4:00 p.m. EST was
0.76. I use end of day readings of 0.75 and higher to
alert me that we are close to some sort of a tradeable
short-covering rally, but my ideal recipe for a
capitulation in this market would be an end of day Total
CBOE put/Call ratio of greater than 0.99 accompanied by
large NASDAQ volume of 2.4 billion shares.
I have not seen the kind of capitulation volume I would
like to see in the NASDAQ to signal a tossing of the
towel, but if NASDAQ prices drop below the 2000 in
Monday's session, I would have to guess that plenty of
stalwart bears will use that event as a mandate to take
profits by closing out open short positions (buy to
Monday is going to to be a little tricky because this
bear market in the NASDAQ has not given bullish
performances on Mondays following down Friday's; quite
often the last of the selling can be pushed off until
Tuesday morning. Intraday readings of volume and price may
offer insight in Monday's session. There are addtional
complications in that next week is the week of the Triple
Witch which adds to the potential for volatility.
Immediate resistance for the NASDAQ is 2084-2124.
Resistance becomes thick in the 2159-2239 area. There is a focus of resistance 2188-2204. (Additional resistance
levels for the NASDAQ remain 2249-2287, then 2314-2351.)
Choosing NASDAQ support levels is difficult because the
index has traveled back in time by more than two years and
the older the price formation the less likely it is to
provide viable readings. NASDAQ prints sub 2000 should
start some short-covering but I would prefer to see
excessive P/C ratios at the same time.
I expect prices to
drop at the open, move under 2000 and then some
short-covering could start. I'll call chart support
2058-1924 There is a focus of support 2036-2000 (which
means that we might not see a sub 2000 print). For
Fibonacci fans, the .618 retracement from the NASDAQ's
record high close is near 1928. The .618 retracement from
the intraday high of 5132.52 is 1960.62
The S&P 500 has immediate resistance 1240-1253.
Considerable resistance starts with prints of 1264 and
higher, then the 1274-1293 area.
Immediate S&P 500 support 1224-1214 (actually all the
way down to 1206).
Anytime prices move above a layer of resistance, that
layer is then considered support. Anytime prices move
below a layer of support, those prices are then considered
resistance. Cherney is Market Analyst for Standard & Poor's