By Paul Cherney From Cherney Market Analysis
Please note: Cherney will be taking vacation days Thursday, Sept. 1 and Friday, Sept. 2. Commentary will resume Tuesday, Sept. 6.
On Tuesday, 60-minute measures hit oversold readings late in the afternoon. Readings like this often precede an opening lift in prices that can last as few as 1 hour and as many as 4 hours.
The technical conditions as I measure them are not dire. The markets are short-term oversold on several measures and prices can edge a little higher. Crude oil traded much of Tuesday's session above $70 and yet there was no crush for the exits in the equity markets.
Right now, I still cannot rule out some consolidation near current prices or slightly lower. I still do not think that the indexes can generate a significant run higher at this time (over the next week), but if the price of crude oil starts lower in a round of short-term profit-taking, the equity indexes will move higher and this is a real possibility.
Last week, I postulated that maybe the crude futures had to have prints at $70 plus to initiate some short-term profit-taking. We have seen prints above $70. If there is some short-term profit-taking that forces crude oil prices lower, equity indexes will move higher.
Wednesday has a special wild-card: at 10:30 a.m. ET, the oil inventory reports will be delivered.
While I don't think that the markets can mount a full steam trend higher right now (should be some basing sideways over the next 5 or 10 trade days), I would have to admit I was wrong about the ability of the markets to run higher if the S&P 500 had a close above 1228.96. The NASDAQ is the index that has the greater potential to move higher but it has not tested the 2106 (or lower) level yet. It might not, but it would have to close above the 2158.99 level for me to abandon concerns about a drift lower and basing.
I would still like to see some sort of a definitive sign of absolute capitulation for the equity markets -- some sort of an extreme reading that suggests that some portion of the investing public has thrown in the towel. Readings like that might be hard to come by during this summer vacation period.
Intraday resistance for the NASDAQ is Thursday's shelf at 2130-2138.46.
Intraday resistance for the S&P 500 1209-1214.28, stacked at 1215-1219.
Due to the slow-motion drift lower during the month of August, resistance levels are stacked:
The NASDAQ has a shelf of resistance at 2139-2145.71, stacked at 2146.49-2157.98, the focus of resistance is 2151-2158. Next resistance 2165-2185.91, resistance gets thick 2177.85 and higher. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.
S&P 500 resistance is a shelf 1215-1219 then 1222.50-1225.08, and 1222.64-1227.61. A focus of resistance is created by the overlapping ranges at 1222.50-1225.08. Resistance is stacked and formidable at 1229-1239.76, but I think there would be additional upside if the S&P 500 posted a close above 1228.96. A combination of several intraday plateaus creates a focus of resistance at 1238-1242.62, but resistance runs all the way 1245.81. The next focus of resistance above 1245 is 1249.23-1267.
The next meaningful support for the NASDAQ is 2106-2039 with a focus of support 2106-2076 (very strong and should hold). Has not been tested yet.
The S&P 500 has support 1206-1165 with a focus of support 1206-1183. This is a very strong layer of support, if prices drop under 1200, prints 1198-1194 should attract buyers again.