We noted a potential change of trend last Thursday when a 2 month downtrend on the NASDAQ had reversed. We also started pointing out in our recaps late last week a lot of broken down areas of the market (momentum / growth type stocks) staged breakouts over long term downtrends. Last Friday was a nice through day but the NASDAQ still needed to create a new higher high which it did easily today. So the time for risk raking came back to the market over the past 3 sessions. The S&P 500 gained 0.60% and the NASDAQ 1.22%. Durable goods unexpectedly rose 0.8 percent in April, according to the Commerce Department, exceeding expectation for a loss of 0.7 percent.
The NASDAQ has now broken over a 2 month period of consolidation and we now have to see if a new pattern emerges; we had a very “easy” one to identify for nearly 18 months until the March breakdown. The S&P 500 as you see is also nearing some resistance so any straight move up from here might be constrained.
The Russell 2000 likewise finally is showing money rotating back into it the past few days.
Another sign of caution VERY near term – the NASDAQ McClellan Oscillator is at its most overbought in quite a long time. So a day or two of consolidation would be healthy.
Apple (AAPL) has been on our radar the past few weeks as a very promising chart – and we saw another nice move today. That said, this one seems very overbought near term and needs a bit of rest!
The biotech stocks also finally broke out of this consolidation range – a group that has been leading the NASDAQ for years.
When the NASDAQ is back in favor you see a lot of the familiar names rally – see Priceline.com (PCLN) and Facebook (FB) today.