Friday's session saw high volume (many sellers being satisfied) and extreme Put/Call ratios. As of 3:30 ET, the CBOE Equity-Only Put/Call ratio was 1.03 -- huge for equity-only Put/Call ratios. At the same time, the CBOE Total Put/Call ratio was 1.51 -- also huge.
These are oversold readings and some sort of a bounce would be natural, but there is a wildcard. The wildcard is the public's reaction to a weekend of financial shows focusing on the selling we have seen this week. This could cause weakness on Monday if the public capitulates to the sell side after being inundated with negative financial press all weekend.
Regardless, we now have short-term oversold conditions, high volume, and high Put/Call ratios. I doubt that prices can just reverse and run higher, but a bounce looks likely. Conservative position traders would probably wait to see prices demonstrate the ability to close above the previous day's high before they joined any buying. Friday's highs were 1162.05 for the S&P 500 and 1940.15 for the Nasdaq. So, for Monday, they would be the price levels that, if exceeded, could see a wave of buying come in, and make me start to second guess my expectation that the market can't simply reverse and trend higher, as mentioned earlier. Usually (even though we can have a short-covering rally), the kind of damage we have seen takes a little time to heal.
support is 1,147-1,120. There is a focus of support at 1,142-1,131.
The Nasdaq has two layers of support that were established in September and October of 2004; these layers are 1,971-1,899.33 and 1,925.85-1,852.59. The overlap is 1,925.85-1,899.33 and this represents very strong support.
resistance for the S&P 500 is 1,150-1,155.57. More substantial resistance is the former trading range of 1,163-1,193.28; inside this area resistance gets thick, with prints 1,167 and higher.
Immediate intraday resistance for the Nasdaq is 1,914-1,928.02, stacked at 1,930-1,940.15, then 1,955-1,968.03; the trading range that was broken represents broad resistance at 1,968-2,021.82. Cherney is chief market analyst for Standard & Poor's