I think the chances are good that a short-term trend lower is unfolding in the Nasdaq composite index, and its weakness can weigh on the S&P 500.
If the Nasdaq is going to lead the way lower, I would expect to see a close under 2,039.72 on Tuesday, Feb. 22, or Wednesday, Feb. 23. Nasdaq 2,039.72 was the intraday low on Feb. 11. If the Nasdaq does not have a close under 2,039.72, or, if the Nasdaq moves higher and closes above 2,093.68, then I would have to declare myself wrong in my assumption that a leg lower for the Nasdaq is taking place.
A Nasdaq close under 2,039.72 would just be a step downward that offers some confirmation that the trend is lower. The Nasdaq has
support starting right at 2,039, the support runs 2,039-2,008, inside this there is a focus of support at 2,036-2,024. A close under 2,008 would be another step in a downtrend and would increase concerns for a test of the next layer of support: 1,980-1,900. The support in this zone starts to thicken at 1,971-1,947.
For the S&P 500, immediate support is 1,198.75-1,191.54. There is a critical layer of support at 1,190-1,185.63, if this little shelf is undercut, then I would expect to see a stairstep decline unfold. On the daily charts there is support at 1,184-1,160, inside this support are shelves. The biggest support looks like 1,178-1,163. Next support is 1,142-1,090.
Very near the close of trading on Friday, the 10-day exponential
moving average for the CBOE volatility index, or VXO, was 11.52, the 30-day was 12.19. I expect price weakness in stocks if the VXO moves above 11.52. I would guess that aggressive selling is in place if the VXO moves above 12.19. I think it would probably be a positive for stock prices if the VXO stayed below 11.08. Cherney is chief market analyst for Standard & Poor's