The Nasdaq recorded a good week after hitting (and holding) the 4200-4250 support area we pointed out in our post of two weeks ago. The market went to the edge of the cliff and then turned back. The classic path of max confusion.
This means the setup on the chart has improved a lot:
There are bullish divergences in the Earl (blue line) and MoM indicators. And the slower Earl2(orange) keeps heading higher with more room to rise. Looks good. The first overhead resistance is in the 4600-4700 area, and if that doesn’t stop the advance then 4900 becomes the next target. I think the market will pause just above 4600 and perhaps throw in a few sharp down days for the sake of confusion. But you never know what happens if short covering kicks in. If too many traders are waiting for the first chance to cover shorts then any dips in the market may be short and shallow for a while.
Needless to say that a drop below 4200 would now look very bad. But the market has built a nice cushion with last week’s climb. I wouldn’t bet against this market as long as MoM indicator keeps pointing up for the major indexes. You can find the MoM in the reversal levels tables I post through Twitter every day.