Big Win For Bulls as NASDAQ Hits Major New High

Bulls win big, markets breakout, and the NASDAQ Composite confirms a decade long high.

The complete scorecard for last week's action.

And for the month of April, the S&P 500 finished near its high, up about 2.9%.

Now that we have a confirmed breakout through the mid-February peak, we can confidently declare the resumption of the prior intermediate-term uptrend.

Also, its important to remember that all of this started with a couple of big runaway gaps, a potent pattern that I discussed in the prior update. (Image: americanistadechiapas on Flickr)

Once again, we can look at last week's price action and clearly see that the bulls were in complete control of the underlying trend. We opened the week near the low end of the range, and finished the week near upper right edge of the chart.

So, based on the prior week's trading, it looks like the 1350 support level would be an area worth watching.

 

 

Take notice, we have a confirmed head and shoulders bottom breakout as well; a pattern that has been discussed at length in prior updates.

"However, its worth mentioning that we may be in the process of forming a bullish head and shoulders bottom here, which has been outlined on the chart. If the bulls can hold on and defend Thursday's low near the 50-day MA support line (blue), we may have a right shoulder in place. A breakout from this range (and through the neckline of the H&S pattern) would confirm a new bull market high, and further upside from that point would be likely."

Last week, as the bulls managed to hold on to Thursday's low and subsequently drive prices higher, it became increasingly apparent that this pattern may be coming to fruition.

As Edwards and Magee explain in Technical Analyis of Stock Trends, "...one of these patterns which develops in a rising market will take the form of a Head and Shoulders Bottom. By the time these price formations are completed (left shoulder, head and right shoulder evident), there is no question as to their implications. But at the head stage, before the right shoulder is constructed, there may be considerable doubt as to what is really going on."

The bulls did some serious work last week. With a few successful closes above the pattern's neckline (red resistance line), its clear that they are once again in control. Also, over the short/intermediate term, the neckline (1350) should now serve as a support level.

 

 

In the mid-February Weekly Update, I mentioned that the NASDAQ Index was remarkably close to surpassing a major decade long high. Unfortunately, I was a bit early with the call, and the equity markets slipped into a shallow 7-week correction.

But the long-term outlook was still clearly bullish, and I remained confident that the underlying primary uptrend had a strong chance of prevailing.

"This is a long-term update, and we focus on the big picture. Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play. What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out.

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market."

And now finally, we can cross a new NASDAQ high off our to do list. The benchmark index closed at 2873 last week on above average volume.

At this point, the long-term trend is decisively to the upside, and the intermediate-term trend is confirmed to be higher as well. We are currently trading above the 10-week MA support line on both of the indices that we track, and prices sit near new bull market highs.

Key intermediate-term levels to watch on the NASDAQ include support near 2500, and the 10-week moving average line near 2870.

On the S&P 500, keep an eye on resistance near 1400, and the 10-week moving average support line near 1325.

 

 

With March in the bag, lets take a look at the monthly chart. The S&P 500 performed quite well in April, rising nearly 2.9%.

The benchmark index traded in a 70 point range, but finished the month just 1 point off the high. Also, we continue to trade well above a rising 12-month moving average support line (1230), so the long-term bullish trend remains intact.

 

 

Both of the key indices we track have recently confirmed a new bull market high. Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal.

 

 

The Dollar Index continued to slide last week, falling 1.3% after a 1.1% decline the prior week. The Index also confirmed another multi-year low.

The short/intermediate term trend is still to the downside, and the next major short/intermediate-term support level to watch has been highlighted.

Also, the long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

 

 

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