Normally, there is a tendency to see prices rise during January, but this might simply be the result of the fact that normally, stock market prices rise. Geopolitical uncertainties keep the odds high that the sidelines will remain attractive to many investors during the first few trade days of the month.
Some resolution to the Iraq situation and/or a flow of good corporate earnings reports will help remove some of the uncertainties weighing on sentiment. Earnings reports usually start to pick up in the second week of January.
The low trading volumes mean that price action is largely in the hands of shorter-term traders who can whip prices up or down, but it is unlikely that they will be able to generate a lasting trend in either direction.
Last week's signal (based on weekly measures of the S&P 500 prices and the NYSE volume) remains in place suggesting that lows could unfold starting Friday of this week or Monday-Tuesday of next week.
Support: The S&P 500 chart still looks constructive as if a platform is established, but currently volume measures are not healthy enough to suggest that the current price weakness is over, weaker prices after the beginning of the new year appear likely right now, but the downside risk appears limited.
S&P 500 intermediate term support (based on end-of-day, daily price bars) is 884-867 which still looks strong and should hold on a closing basis.
Immediate support for the Nasdaq has broken (it was 1363-1346) and the more intermediate term (daily bars) support is 1347-1317, then 1309-1279.
Resistance: The S&P 500 has immediate resistance at 878-888, then 900-911.06.
The Nasdaq has immediate intraday resistance at 1342.67-1359.49 and 1354-1369.21, which makes the 1354-1359.49 area a focus of resistance. Additional resistance is 1382-1411.62. Cherney is chief market analyst for Standard & Poor's