Looking for Some Consolidation

The market is overbought but we have had follow through after follow. More profoundly, we have had a follow through day after the NASDAQ broke through its 200-day average. We consider this a significant technical breakthrough. Scale your charts back to August of 2004. The market was just as overbought by month’s end as it is now but the retracement was insignificant in comparison to the climb that followed. We see no technical reason that a similar pattern cannot play itself out here. That said, look for a pullback to ensue over the next week. We expect the pullback to set up for a good buying opportunity, but it would be foolhardy to look for significantly higher prices before the market has a chance to regroup a bit.