Downside appears limited. On a short-term basis, a persistent uptrend was established in the last four trading days of this past week and while I do not have technical indicators suggesting that the odds favor higher prices, the indexes (S&P 500 and Nasdaq) are poised just below resistance levels.
The markets are thick with bearish short positions and the only way to close out a short is to become a buyer. I would expect a sharp jump in prices if some of the uncertainty between the U.S. and Iraq is resolved. A scramble to cover outstanding short positions represents the fuel for upside.
Immediate intraday support for the S&P 500 is 838-831. Additional support is 826-815, with a focus of 826.66-818.70. Next S&P 500 support is 806-768.
The Nasdaq has immediate intraday support at 1332-1321. Additional support is 1309-1295.06, then all the way to 1279, with a focus of 1296-1287.
The S&P 500 has immediate resistance at 833-847.00. The index managed to print above the 844.60 level in Friday's session, but the looming weekend and the uncertainties of the Iraq situation kept buyers in a cautious mood. Above 847, the next resistance is 853-869 and inside of this layer is an especially thick layer at 857-862. If there are prints above the 852.87 level, there is the potential for a big short-squeeze compounded by momentum players which could see an intraday surge to prints near 870.
The Nasdaq has immediate intraday resistance at 1335-1343. If the index prints above 1343, a short-squeeze could propel prices to the 1355-1379 area. Cherney is chief market analyst for Standard & Poor's