Trader Mike

It certainly got ugly today, especially on the NASDAQ. Once again it’s broken below its 50 day moving average. It’s also sitting just a few points below its May - November trendline. The NASDAQ 100/QQQ was able to make a tiny bounce off of its corresponding trendline to close above the line. So we’re right on the brink of having some bad breaks of these trendlines. The S&P 500, on the other hand, is still hovering above its November highs, where it’s been for the last 7 days. I’ve been amazed at how it’s been able to stay above that support. It’ll be interesting to see if the bulls can make another stand …

I’m very impressed with the strength being exhibited by the S&P 500 (and the Dow). The S&P has been able to hold the support of its November highs while the NASDAQ has been sliding away. Like I mentioned a few days ago, it appears that a rotation into big cap stocks is occurring. The NASDAQ was able to find support today at its middle Bollinger Band and bounced back into positive territory. The result of that action was a nice little shakeout of some longs, possibly trapping some shorts and creating a good number of hammers in NASDAQ stocks. So it seems like in the very short term the path of least resistance …

One of the most important rules from William Eng’s book, Trading Rules, is that ‘bear markets have no supports & bull markets have no resistance.’ The second part of that is very evident right now, especially on the NASDAQ. It looked like the market might have been starting a multi-day pullback last week. The S&P 500 and Dow had completed evening star-ish patterns on Friday. But most of that was negated today by the S&P rallying to take out the resistance of that pattern. The Dow is now sitting just under last week’s resistance. The NASDAQ continued to just obliterate any facsimile of resistance in it’s way. The only not-so-positive thing …