US markets are surging higher again. That’s also what we have been calling for in recent weeks. Eclipse green periods tend to be very positive for stocks, and this one has been no exception. The Nasdaq is now knocking on the door of new record highs, one of the last major indexes to do so. So, where do we go from here? Let’s have a look at the Nasdaq chart (click image to enlarge it):
The Nasdaq has broken out to new multi-year highs, but this may still turn into a false breakout. We start seeing a large rising wedge in the Nasdaq. Major overhead resistance is now just below 5100, with support at 4900. We are about to start a new lunar red period, so we will probably get a pullback or a pausing market in the next couple of weeks. But sooner or later we are to get a breakout, up or down, and that will probably set the tone for the rest of the year.
If this wedge gets broken to the upside then look for the Nasdaq to climb to 6000+. If it goes the other way, then prepare for a rather sharp drop that would take the Nasdaq to 4000-4200. This is a major crossroads.
Technically the Earl (blue line) and MoM indicator are going up from recent lows, but the Earl2 (orange line) is languishing and that’s a warning sign. We risk getting rather large bearish divergences if the current rally stops below 5100.
What may trigger such a breakout move is something I don’t know. But as an old friend used to say: “When the market is ready the catalysts will appear.” All we can do is keep our eyes open and go along with what comes along.
I am preparing for next week’s post and want to use a little poll I have set up. Feel welcome to enter your vote on this question: “How often do you buy a stock that is at record highs?” The link to the poll is here: http://www.easypolls.net/poll.html?p=5507ee16e4b0a63961cbbd23 Thanks for participating. Next week I will give my comments on it.