Confusion Clearing Up

On Wednesday the NASDAQ followed through on a break back above its 200-day SMA and 2000 mark in a big way. This point represented a significant level of overhead supply so the break above will have an ongoing importance as we analyze the intermediate trend of the market and in particular, the tech sector, which has moved back to the front to take a leadership role. With this in mind, the NASDAQ has move up nearly 150 points since bottoming out near the 1900 level last month. It consolidated for a couple of weeks around 1975 but has been on a tear since. The market is getting top heavy near term and we would expect to see the NASDAQ come back and test its 200-day average or at least trade in a consolidation pattern letting it build a base from which to launch higher. We will be watching for this to occur over the next week or two. In the meantime, now that the trend is evident it will pay to trade with the trend. This does not mean that all stocks will trade in lock step with the indices. Now that the market has broken out we would expect that traders will be much more hesitant to sell into breakouts as they have been doing over the past 6 months. We would also expect to see some nice pattern developments as a big question mark has now been erased in the minds of many market participants. For the past few months the market has been very confusing. This has led to a lack of pattern development and choppy trading conditions. Things are just now starting to return to business as usual and conditions continue to improve as stocks once again find purpose.