The chart pattern we had Wednesday was very similar to what I wanted to see for a capitulation: we started out lower, tried to move higher, and then reversed and undercut the standing intraday lows, but then the buyers moved in.
Was it a capitulation? It was pretty close, and I think it was enough to start a short-term trend higher which lasts for more than one day, but the word "capitulation" should be reserved for something a little more dramatic. Total put volume at the CBOE was over 585,000 contracts (high total put volume was one of the ingredients missing from the recent high Put/Call ratio readings). Total trading volume for the NYSE was at good levels, but the Nasdaq's total trading volume was little shy of the minimum I would have liked to have seen.
The depth of the selling and the attendant volume really didn't go far enough to label the day a capitulation. I am going to call it a "shake-out."
I think prices are going to work higher again on Thursday. The Nasdaq has thick resistance at 1532-1550; if prices can move above the 1550 level, bears will scramble to cover open shorts, but the index has a focus of resistance at 1560-1570 and prints in that area would probably be the absolute best the Nasdaq can do for the day. Another day of jagged trading with a positive bias seems likely. If I am wrong, and prices just take off like a rocket, then each successive layer of resistance which is exceeded converts itself to support.
Immediate intraday resistance for the Nasdaq is 1517-1528.40, then brick wall resistance is 1554-1595. There is a focus of resistance inside this brick wall at1560-1570.
For the S&P 500, immediate intraday resistance is 1023-1027.74, then 1032-1037.80. There is thick price traffic 1039-1047.
Immediate Nasdaq (intraday) support is 1503-1489. The end of day charts show a band of support 1516-1466.
Immediate intraday support for the S&P 500 is 1025-1012. The next layer of support is now 1011-1002.
Here are the price ranges and closes for the Nasdaq and the S&P 500 from the day of the September 2001 lows.
S&P 500 intraday high 984.54, intraday low 944.75, close 965.80
Nasdaq intraday high 1454.04, intraday low 1387.06, close 1423.19. Cherney is chief market analyst for Standard & Poor's