Since the Nasdaq has been the index that has lead this rally I think it’s important to focus on it for clues as to whether this rally will continue. A few things I’m noticing that makes the case this parade will continue is when you view the Nasdaq on a 30 min intraday one can see a reverse head and shoulder pattern that just broke to the upside with Friday’s late day burst. While it’s by no means a perfect pattern, it does speak of consolidation and a continuation move higher.
This next chart shows something very important going on behind the scenes. The percent of stocks moving above their 200 day moving average is approaching pre-market meltdown levels. This internal momentum of individual stocks could push this index much higher than I ever thought possible, maybe even to its falling upper trendline, around the 2100 level. This is not a prediction as I’ve been a stubborn bear for far longer than I needed to be, but it’s one possibility that should be considered.
What’s interesting is should this target be met, it would be an 18% incline. Assuming the Dow would move at least that same amount, that would have the Dow stalling right around the 10,000 mark, which is exactly the psychological barrier one would expect a key reversal to occur. I’m sure at that point not a short would be left anywhere. Food for thought….