Thursday night's (June 10) overnight systems run produced two minor signals with negative implications. NYSE and Nasdaq volume measures and NYSE breadth measures suggest sideways, with a negative bias, short-term downside risk of a 1.6% to a 2.3% closing loss for the S&P 500 by the close on Monday June 21. But, Tuesday's overnight systems run produced measures for both volume and breadth which raise questions as to the legitimacy of concerns for S&P 500 closes in the 1,118-1,110 area by Monday (June 21).
Tuesday's rebound was strong enough to cause a halt in the descent of measures of volume and breadth which I use as secondary indicators to confirm or contradict the signals generated by Thursday's overnight systems run. The halt in the downside momentum of breadth and volume measures has created a dissimilarity between current market conditions and measures in the wake of the April 12, 2004, and January 27, 2004, signals. Chart evidence that I was wrong about short-term downside risk would be delivered by the markets if the S&P 500 can close above 1,142.18 and/or the Nasdaq manages to close above 2,023.
The CBOE volatility index, or VXO, is below its 10-day exponential moving average and as long as this is the case, downside is probably limited. Near the close on Wednesday, the 10-day exponential moving average of the VXO was 15.32.
The shelves of price action established mid-day on Wednesday, June 9, 2004 represent the most important short-term
resistance levels. Those mid-day shelves are Nasdaq 2,001-2,006.79, S&P 500 1,134.34-1,136.53. In Tuesday's (June 15) session, the S&P 500 managed to spend some time above 1,136.53 with an intraday high of 1,137.36, so that now becomes the upper edge of immediate intraday resistance: 1,134.34-1,137.36.
support is 1,129-1,009.91, with a concentration of price action at 1,125-1,113. Next support: 1,102.77 to 1,078, with a focus 1,097-1,085.
Nasdaq immediate support is 1,996-1,982.41. Cherney is chief market analyst for Standard & Poor's