After six straight up days coming right up from the lows of two Fridays ago, the NASDAQ Composite Index finally backed down on light volume Friday. At this stage we now want to see if and how it consolidates the prior reaction rally. This could occur on a pullback to and test of the 50-dma, or the index could simply hold tight sideways as the 50-dma catches up.
Other alternatives, all of which are plausible, would be a nasty reversal back below the 50-dma, or a continued melt-up back to the prior highs. But no matter how you slice it, the sharp move off the absolute lows has been quite surprising as it has been accompanied by a number of busted leaders moving right back to the upside. It’s as if the sharp break off the peak merely pulled on a rubber band attached to their backsides, and once it had stretched far enough it was released, sending stocks snapping right back to the upside.
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