Through last Friday, May 1^st, there had been eight straight weeks of upward movement in the Nasdaq Composite. For eight straight weeks, each Friday’s close was higher than the prior week’s high.

Remarkable! In reviewing the Nasdaq Composite weekly chart, looking for another run of such remarkable length, we must peel the pages back to late 1999-early-2000. That pre-popping run, the last hurrah of the Internet bubble, ran for eleven consecutive weeks without a pullback!

Eight weeks – still, that’s nothing to sneeze at! What a feat; however, many technical traders argued the Nasdaq Composite was over extended and needed a pullback to help consolidate prices before a more credible move upward could be possible.

This week, the Nasdaq Composite gave in . . . Well, sort of.

The Nasdaq Composite’s Friday, May 8^th close, for the first time in eight weeks, did not surpass the prior week’s high-water mark. But, before we get too excited, realize two things: 1) the weekly Nasdaq Composite did close higher than it opened, and 2) its close was higher than last week’s close, but lower than last week’s high. Take a look inside the green box in the chart (right side-bar) for a good visual of this. Technically, that does qualify as a pullback. The Nasdaq Composite may be getting tired but, just like The Little Engine That Could, it seemingly will not give up on climbing this hill.

The other three indexes tracked for this column (see General Trend Indicator box in right sidebar) all experienced a pullback three weeks ago. The Nasdaq Composite was still pulling strong at that time. It put in a stellar performance that week as the other Indexes, tired from their climb, fell back.

This week, the other three indexes posted stellar performances and the Nasdaq Composite took a breather. The Nasdaq may still want to run and there does seems to be headroom above it.

In the above Nasdaq Composite weekly chart, take note of the green oval on the right side. This marks off the coming week’s battle. If the Index manages to push above the red/blue line directly above it, there is no significant resistance above that point for a long distance (note the red oval to the left).

On the other hand, if next week’s price action brings a continued pullback, violation of the red/blue line directly beneath could be an indication of looming weakness. In theory, the line below should now act as price support. It is reasonable, and would prove healthy, for the Nasdaq Composite to pullback to this line and test the support at that level. If the support holds (the test is successful), that becomes a rally point for continued assault on upward prices.

Monday and Tuesday were about the same for these markets; however, the Nasdaq Composite struggled the balance of the week while the Dow Industrials rallied.

The above chart shows the Daily bars for the Nasdaq Composite Index. The five bars inside the green box represent this week’s price activity. The blue box represents last week’s price activity and how it intersects this week’s price activity. The red line drawn around the 1719 price level represents last week’s close.

Take note that the last bar to the right, Friday May 8^th, is inside the blue box but above the red line. This better illustrates our above discussion of the weekly chart. The Nasdaq Composite closed below last week’s high; however, it closed above last week’s closing price.

This next chart is the Daily chart for the Dow Jones Industrials. For comparison, I’ve marked it up in a similar fashion.

On the above daily chart of the Dow Jones Industrials, note this week’s price action in the green box mostly occurred above last week’s price action in the blue box. Note, also, the red line representing last week’s close for the Dow-30. This week’s entire price action occurred above the close for last week.

Relatively, the Dow-30 showed more strength this week than did the Nasdaq Composite Index. Although the week started on a similar note for both indexes, the Dow-30 had much more strength into the second half of the week.

The Nasdaq Composite will be fighting with the resistance level indicated in chart #2, above (indicated by the green oval). If it is successful in penetrating that level, there is a void above that may invite prices upward, perhaps swiftly.

Or, the Nasdaq Composite may pull back, in a test of support around the 1650 level. If it finds support at that level, that will become a solid platform from which to build – thus strengthening the legitimacy of this rally.

Either way, the Nasdaq Composite is set to provide much entertainment next week.

The Dow-30, on the other hand, has found renewed strength – bursting, convincingly, above the resistance that seemed to curtail its advances over the last several weeks. The Dow-30 will now engage the next band of resistance, around the 9000 level.

Advice: It's probably a good idea to trade stocks moving in the direction of the general market trend at this time. The bulls have trampled the bears over the last several weeks.

Please Note: This article is an expression of my opinion. It’s meant to inform your thinking, not lead it. To be a mature investor/trader is to be educated – to think for one’s self. You are responsible to decide the best place for your money.

Always remember, any decision you make will put your money at risk – given that market conditions do change and the value of your investment will rise and fall based on those changing conditions.

Information presented herein was current at time of publication; however, change is inevitable. Data presented may have been overtaken by market events. Should you desire to act on information presented herein, always verify it against current market conditions.

I accept no responsibility for any loss or damage resulting directly or indirectly from the use of content in this article.

Disclosure: At the time of publication, I do not hold any positions in stocks mentioned in this article. I do reserve the right, however, to take a position at some future time.

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