From another board:Cherney for April 1: More Downside Likely
Short-term indicators are negative, but prices will probably stay inside immediate support zones for Tuesday's session
by Paul Cherney, chief market analyst for Standard & Poor's
The markets need a positive headline from the war front.
Both the Nasdaq and the S&P 500 are testing substantial layers of support. Short-term indicators are negative, but prices will probably stay inside these immediate support zones for Tuesday's session
The downside is probably not over. On Friday, the Equity Only Put/Call ratio at the CBOE finished the session at 1.32. This is the highest reading of the last 4 years.
In bull markets, excessive put/call ratios usually signal the end of a retrenchment for prices and this dramatically increases the chances for a short-covering jump and a reversal in trend, but the bear market of the past three years has produced a different and pretty consistent pattern: high CBOE Equity Only Put/Call ratios are usually followed by lower prices.
In looking at price action in the first 10 trade days after a signal (a signal being an Equity Only P/C ratio greater than 1.000), the odds favor lower closes.
Since 1999 there have been 17 trade days when the CBOE's end of day Equity Only Put/Call ratio has finished above 1.000.
Fourteen out of 17 of those signals saw lower closing prices for the S&P 500 in the 10 trade days which followed.
The average of the worst performances was a loss of 3.2% which would equate to a closing loss for today's S&P 500 of 835.87.
The average of all the best 10 day performance was a gain of 2.7% which would equate to a close of 886.81.
If disappointing headlines from the war front become a daily occurrence, potential buyers will freeze on the sidelines and price action will be almost entirely at the whim of short-term traders.
The S&P 500's substantial support is 852-826, with a focus of 848-839.
The Nasdaq's substantial support is 1352-1326.49, with a focus of 1347-1333.
S&P 500 immediate resistance is 858-875, then more substantial resistance is 880-895.60, with a focus of 885.64-893.17. After the broader resistance at 887 to 911, the next resistance is 920-935.
Immediate Nasdaq resistance is 1369-1392.46; the stronger resistance is 1397-1425, with a well defined focus of resistance at 1410-1418. A broader band of resistance for the Nasdaq is 1420-1467, with a focus of 1433-1451. |
