Markets have stretched themselves into new highs. The Nasdaq is the main laggard. So far the “correction” has been limited to a few overvalued sectors and appears over already. But that doesn’t necessarily set us up for another big swing to the upside. I think we will have a choppy sideways market for several more months. Let’s have a look at the Nasdaq chart (click for larger image):
The Nasdaq has largely followed the scenario we lined out a few weeks ago. The lunar green period has seen the Nasdaq rebound, but the series of lower highs is not yet broken, so another drop to lower lows should not surprise us. My sense is that we will now go through a period of market indecision. Barring major market moving news, I look for the Nasdaq to grind inside the gray triangle for several weeks. Some technicians will probably spot a head and shoulders pattern and call for a market decline to 3500. That’s a viable scenario, but I don’t think we will see it in the lunar red period that starts this week. Maybe in the next one, come June. We will cover that scenario in due time.
Stay tuned.
Danny
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