Friday's drop on the Nasdaq 100 put a damper on my bias for a break above 1760 in the next couple of weeks.
The 1735 level held as upside resistance and the 1720 level failed to hold as support. The break of 1720 created a rush of distribution pressure that pushed the index under 1710.
While the bulls still are in control in all three time frames, they have a lot of work to do in the next few days if they want to retain rights to the intraday chart.
They need to hold the index above 1700 and move it back above 1720.
An intraday break of 1700 would lower the probability for the bulls to maintain control; a close under 1700 would all but give the chart to the bears for the next few days.
I expect Friday's plunge to turn out to be a one-day affair and that the bulls will regain the 1720 level in the next few days.
The uptrend line on the daily chart that formed in late 2005 is relatively intact, aside from a few points in March and early April when the index dipped below it but recovered within a session or two.
This record of resilience makes me think there is a high probability that the index would bounce back if there were a drop below 1700.
The near term still favors the bulls -- only a close under 1700 would give the daily chart to the bears.
The uptrend on the weekly chart is also firmly intact. 1635, 1670 and 1685-90 have acted as solid support in the last few months. A break of 1680 would likely shift the balance on the weekly chart to the bears; a break of 1635 would give them solid control of all three charts.
I don't expect this in the second quarter. The higher probability still is that the bulls will move the index back above 1735 and test 1760 before the end of the second quarter.
A break and close above 1765 would be an uptrend confirmation signal.
Chris Schumacher is a financial trader, speaker, writer and co-author of
Techniques of Tape Reading
. He has delivered seminars throughout the U.S. and is a featured speaker at trading expos. At the time of publication, Schumacher had no position in any securities mentioned in this column, although holdings can change at any time. He is a graduate of Ohio State University and has served as a guest lecturer at Ohio State University's Fisher College of Business as well as the Center for Entrepreneurship. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback;
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