By Paul Cherney From Cherney Market Analysis
Thursday's session represented a deterioration in volume and breadth measures. I think the markets are ripe for some profit-taking, but so far, there have not been definitive crosses of thresholds that would increase the likelihood of some bigger retracement.
The July employment report comes Friday at 8:30 am. The Street expects nonfarm payrolls to increase 180,000. We already know that the Fed still appears determined to mechanically increase the benchmark Fed funds target rate, so, if the number comes in higher than 180,000, a rebound in prices seems likely. Even if there is a positive response to the employment report, I think the positive influence would be brief (2 or 3 trade days).
Last year, the markets bottomed in August, this year I think they have already had a good run and need to consolidate or retrace. The indexes are in places on the chart where upside appears limited but today's weakness was not enough to force an outright negative stance.
Besides the dwindling earnings reports, it seems right now that there are only two potential headline drivers for the markets, the employment report and the Aug. 9 FOMC meeting.
Immediate Intraday Resistances:
Nasdaq immediate resistance is a thin shelf at 2201.91-2207.79, then 2211-2249, with a focus at 2211-2233.33. Resistance gets thick at 2225-2233.
S&P 500 intraday resistance is 1238-1241.73, overlapped at 1240.90-1245.81, which makes the 1240.90-1241.73 level a focus of immediate intraday resistance. The next focus of resistance above 1245 is 1249.23-1267.
Immediate Intraday Supports:
Nasdaq support is 2201-2184.74. Supports are stacked, and it is usually difficult for prices to drop through stacked support unless there is a headline of undeniably bearish (or sentimental) impact. Next supports are 2189-2182, then 2175-2165.44, overlapped at 2167-2144.78.
S&P 500 has immediate intraday support at 1239.04-1230, overlapped at 1231.79-1223.03, which creates a focus of support 1231.79-1230.00. There is a thin shelf at 1219-1215; the next meaningful support is 1206-1183.
S&P 500 resistance is 1232-1286.62, with a focus of resistance at 1249.23-1267.
For the Nasdaq daily charts, resistance becomes thick at 2263.75-2328.05.
As I have mentioned previously, I would become concerned about a shift toward profit-taking if the Nasdaq posted a close under 2165.44. The index has a focus of support at 2167-2165.44. A close below 2184 would probably force a test of the 2175-2165 area, but the first test of this area should probably produce a bounce. Nasdaq 2167-2165.44 was established as a floor for prices July 22 through July 27. It is an important layer of support because these prices are where buyers have consistently bought the market and pushed it higher; if there is a Nasdaq close below this area, that would suggest to me that a shift in sentiment has occurred (because if prices closed below 2165.44, it would mean that people are no longer willing to take a long-sided chance at those levels.) For the S&P 500, I would become concerned about a shift in sentiment if the index posted a close below 1219.80.