By Paul Cherney Immediate downside risk is limited. I expect to see a labored move higher -- which should see the S&P 500 post a close in the 909-928 area of resistance -- but I am uncertain as to the timeframe of such a move. It might happen in the next couple of trading days. A recent historical study I ran makes a case for potential overhead resistance with an S&P 500 close in the 918-925 area.
Wednesday's intraday action was a short-term positive, but the move higher did not garner sufficient volume to suggest that there are multiple trading days of gains upon gains ahead. There should still be enough residual momentum from the move off the Oct. 10 lows to push prices higher, though. With the recent record high NYSE short interest, the higher prices move, the more likely the movement higher will strike fear in the hearts of the bears and force them to cover. The short interest represents a source of buyers which could fuel additional gains.
There could be other technical conditions which arise in overnight systems, or throughout the course of intraday trading, which could increase chances for additional gains above the S&P 500 909-928 resistance. But they have not become apparent yet.
Support: The S&P 500 has multiple stairsteps of support: 890-873, 877.51-866.14, 866.64-856.28, and 850-840. A move below 866 is not expected.
Immediate Nasdaq support is 1287-1267, with a focus at 1279-1267; Wednesday's intraday low was 1279.46. Additional layers of support are not expected to be tested over the next couple of trading days, but they are: 1256-1229 and 1244-1220, which makes the 1244-1229 area a focus of support.
Resistance: Immediate intraday resistance for the S&P 500 is 900.50-909.89. Next resistance is 909-928.
The Nasdaq has thick resistance at 1299-1347, with a focus of 1307-1327. There is/was a particularly congested area of prices at 1309-1316, and Wednesday's move above this level has converted it to the first line of support. The Nasdaq has another layer of resistance which is 1332-1347. Cherney is chief market analyst for Standard & Poor's