Amazing how a washout like last week can set the stage for a trend change - all of the sudden, you find yourself looking up instead of exclusively down, the clouds seem to part, it's Spring... At this point, a bounce + sideways would almost feel like the '99 - '00 rally ("been down so long, it looks like up...").
As many of us have noted, when indicators, sentiment, and price all reach an extreme at once, odds favor an at least partial regression to the mean - in this case a snapback - unless some new factor (something more than yet another tech earnings warning) re-accelerates momentum in the prevailing direction. (Sometimes, all it takes is an overdone rally.)
Still, can't be much of a believer in the Nasdaq until and unless it breaks back above the critical gap a week ago. Given the recent tendency to fail at resistance sometimes by fractions of a point, it would take a close well above 2042 and a green week to show that the downtrend had truly stalled: It would be the first time in a very long time that the Nasdaq had successfully challenged a significant resistance level. The last few pathetic rallies fell off well below making any truly positive statement. Things might really start getting interesting around the 2250 - 2300 range - lots of horizontal resistance there, also the 38.2% retracement from the low to the last intermediate high at 2256, right around the January low, among other significant price points.
On the other hand, even if the reaction to the Fed doesn't produce the kind of sell-off that was so widely feared heading into this week, a failure below 2042 would imply that the bear case is at least as strong as it looked just a few days ago, and that a dramatic re-test of the new low is coming sooner rather than later. |
