The Nasdaq Composite (first daily chart below) is gapping directly into that key 2,600 level. On the one hand, it is a plus for the bulls to partially fill last week’s gap. However, I do not see a high probability trade in going long a gap into what is likely to be an area where overhead supply will dominate. I expect 2,600 to continue to be a tough area for the bulls to conquer, without putting in some more work first. Even if the bulls keep running, the chart is sloppy and needs to tighten up to meet my criteria.
The second chart is the Dow Jones Transportation Average. It a good sign for the bulls to see it back above 4,700, and they are pointing to the strength in the trannies to supper their case. Moving above 5,000 remains the line in the sand for a true breakout.
Finally, the Euro/Yen currency cross, which I have been pointing to as a proxy for global risk appetite, is unimpressive today given the news and action in the stock market. I would have expected a much more potent move from the Euro given the kitchen sink approach by central banks.
In sum, there are still troubling signs underneath the hood of the car. Only price pays in the stock market, so the Euro and Nazzy are not reasons to short just yet. However, they are charts to monitor to see if they resolve in favor of the bulls…or not.