By Paul Cherney The Nasdaq index has been the leader in the current decline, so I am focusing on it. The index has finally fallen into an area of chart
support that looks like a likely spot for an oversold rebound, but it will still take a huge improvement to turn the technical measures, and I do not think the first lift can produce them.
The Nasdaq is testing a focus of support in the 1,971-1,954 area. This is inside the broader immediate support of 1,981-1,900. I think the first test of this area (1,971-1,954) is a likely spot on the chart for an oversold rebound. It would have been a source of encouragement to have seen capitulation-style volume, but I cannot dictate to the markets. I have not seen capitulation-style volume for the Nasdaq, but there is no "law of the market" dictating that rebounds and reversals have to display capitulation volume. The NYSE has come close to producing capitulation style volume, but not quite.
The Nasdaq has retraced 50% of the advance it made from the August, 2004, low to the high made on the first trading day of this year; this alone should draw the attention of technically oriented traders who will be looking for an opportunity to take a shot on the long-side.
For Wednesday, expect a bounce, but the deeply negative measures registered in the past 11 trading days keep the odds tilted that the first lift from the current decline, even a lift of 2 to 5 trading days, will probably fail to attract significant follow-through higher. But for tomorrow, ripe for a rebound.
Immediate intraday support for the S&P 500 is 1,179-1,160.52. The S&P 500's test of 1,169-1,163 should bring some short-covering to the market, but a close under 1,160.52 would open downside risk for a test of the next layer of support 1,147-1,120 with a focus of support 1,142-1,131.
Nasdaq support is 1,981-1,900 with a focus 1,971-1,954 and it is being tested right now.
The Nasdaq has
resistance at 1,986-2,008.63, stacked and well-defined at 2,006-2,017.66. This makes a focus of resistance at 2,006-2,008.63. A close above 2,008.63 might force a wave of buying at the open the next morning. Prints 2,016 through 2,027 are thick with resistance. Next resistances are 2,036-2,059 and 2,047-2,069.42, which makes the 2,047-2,059 area a focus of resistance. Additional resistances are directly over the 2,069 level at 2,078-2,093.68 and 2,101-2,111.43.
The S&P 500 has immediate resistance at 1,171-1,179, overlapped at 1,178.82-1,189.50; there is a particularly well-defined layer of resistance at 1,183.78-1,188.40 (generated ahead of the FOMC announcement on Tuesday, Mar. 22). Next resistances are 1,190-1,194.84, then 1,199-1,210; resistance gets thick at 1,204-1,210.54. There is broad resistance at 1,206-1,229.11, which has a focus of resistance at 1,213-1,219. Above 1,229, the next layer of resistance is 1,240-1,286, with a focus at 1,246-1,261. Cherney is chief market analyst for Standard & Poor's