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Too far too fast?

Posted by Dan on February 6, 2012

The market doesn’t seem to stop for anything and just goes higher, with some indices even reaching 11 year highs.
We have been warning for this break to the upside since mid December, and now we have to wonder how far it will carry.
So far our lunar Red Period has not produced any downside action, but I don’t think some pause can be far away. Of course a lot of investors may have been taken by surprise by this move, and looking for a chance to get in on the upside action. Holding bonds yielding two percent suddenly feels rather stupid when you see the market going up 10-20% in a matter of weeks.

Let’s have a look at the current Nasdaq chart (click for larger image):

Nasdaq

This market has broken above 2900, exceeding last year’s high. That’s a positive development, but it can still turn into a failed breakout.
If some pause starts here, then I would expect the market to move sideways between 2900 and 2800, before continuing upwards.

Stay tuned.
Danny

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