Will the Nasdaq synch up?

Posted by downtowntrader | 5/04/2006 11:17:00 PM | 0 comments »

The Nasdaq has been out of synch with the other major markets and that can't last forever. There are a couple things to watch here.

Here is the Nasdaq bouncing off a support line for the second time after breaking it as resistance. If the Nasdaq can get past resistance they will lead another rally. The Nasdaq has managed to trade sideways to the middle of it's trading channel.However, If there is gonna be another rally, then the SP500 needs to clear this triangle which is easier said then done. Look at all the wicks and reversals in this area. Keep in mind that the SP500 is at the top of a trading channel here and for it to breakout takes considerable momentum.

The key to this market is still the Nasdaq. The Dow is over the long term channel. Same goes for the Russell. The SP500 is at the top and only the Nasdaq has ample room before testing the top. I don't think the other markets can pull the Nasdaq up because they have divergences all over the place and deteriorating technicals. However the Nasdaq has been lagging and semiconductors have corrected to the point where there could be enough strength to lead the markets again. My view has been that a drop in overbought commodities could fuel a rotation to technology and the pullback in crude could be part of that. However, this is a tricky market and the rug could be pulled out from under any rally at this point. There is a chance that a bull trap is being set and that the Nasdaq will carve out a head and shoulders top. It really is too early to pick a side so the best strategy is to trade carefully and keep some dry powder until a more clear picture develops. Good Luck,