S&P--Cherney on the Markets: "Look for Capitulation on Wednesday"
personalwealth.com
>>>Tuesday September 12, 2000 (4:39 pm ET)
Look for Capitulation on Wednesday
By Paul Cherney, S&P Market Analyst
NEW YORK, Sep. 12 (Standard & Poor's) - There was a one-day wonder in place on Tuesday, but it didn't last the day. The NASDAQ never generated intraday confirmations and the index ultimately succumbed to selling.
This is the week of the Triple Witch, the almost simultaneous expiration of quarterly futures, monthly index options and monthly equity options. Oftentimes the Wednesday before expiration will open down but then reverse course.
In Tuesday's session, the NASDAQ finished near its lows of the day. This makes me suspicious of any opening strength on Wednesday because usually, after a close near the lows of the session, opening strength which is not accompanied by a headline of undeniably bullish importance proves to be short-lived, running out of momentum within the first 30 minutes before prices dip to print in negative territory.
I think we're going to have to see a real capitulation on Wednesday -- a drop in prices accompanied by a surge in volume and sizeable numbers in the CBOE's Put/Call Ratios. An intraday equity only P/C of at least 0.56, and a Total P/C of at least 0.78.
But this would probably only herald a short-covering rally. Short-covering rallies typically last 1 to 4 trade days before a retracement unfolds which can see prices retest the recently established lows. Historic odds are still very high that even a 1 to 4 day short-covering rally will see prices dip again and undercut the lows established in the morning on Wednesday.
The NASDAQ has support at 3892-3686, there is a focus of support 3851-3760. I am expecting to see NASDAQ prints in the 3810-3790 (at least) in Wednesday's session. Immediate resistance for the NASDAQ begins with prints of 3919-3958 with a focus 3927-3944, next resistance is 3970-4009.
The S&P 500 has support 1482-1468 with a focus 1477-1473 and this are is not expected to be broken on a closing basis. Immediate resistance is former support: 1488-1513.
The DJIA has well established resistance in the 11,200-11,425 area. Support is 10,999-10,832 with overlapping support at 10,850-10,675.<<< |
