Last week we issued a melt-up alert, warning for a buying panic if the Nasdaq broke out above 3730.
That seems to be what we are getting right now.
How would things proceed if this most optimistic scenario continues to unfold?
Here is a chart projecting a path forward for the Nasdaq (click for larger image):
Some people will see a rising wedge in the Nasdaq action since last April. That would call for a significant drop from the current highs. That’s indeed one of the ways things can go forward from here.
The alternative is a continued move to the upside. In that case, look for the Nasdaq to break above 3800 and go to 3900 fairly quickly. Then it will probably spend the rest of October consolidating those gains before heading towards 4000.
Not many investors may put stock in such a rosy scenario, and that is likely to continue as long as the media go on feeding us with enough news items to worry about. But that doesn’t mean it can’t happen.