Week in Review:  Time for Some Consolidation....

The market over the past couple of months has made some impressive gains and appears to us to have started a period of normal and healthy consolidation the past week.  The Nasdaq ran up the right side of its base making the move from 2012 to 2368 over a 12 week period and in light of important resistance in the 2350-75 area we suspect that we are in for a 2-3 week period of digesting those recent gains.   Meanwhile the Dow has broken out to all time highs hitting the 12,000 mark this week for the first time in its history.  We should find strong support at our breakout area of 11,670-750 as we consolidate.  A test of that level would be quite normal and healthy and held to serve to unwind our oscillators.  Look for most major indices to find good supports at their respective 20/50 moving averages on testbacks.   These continue to move higher daily and should meet up with price in the next week or two.  During our period of consolidation we anticipate volume to start coming out of the market once this period is nearing its completion.

Big picture we continue to see many nice 1 year bases form both in key sectors and individual stocks that could use a pullback to form a handle off their bases.  Handles tend to be a multi week period of choppy back and forth mild down action back to the major moving averages that serve to frustrate those looking for a directional move and helps to raise bearish sentiment.   We are already seeing active signs of accumulation on 50 MA tests in many of the leading issues that have corrected back the past week.  We suspect to see this continue over the next couple of weeks.

We would recommend some patience in understanding the process as we welcome this period of consolidation and spend time focusing on the bigger picture bases that are taking shape rather than the day to day back and forth noise.   You will see some of these in our charts below.  Our focus is on picking off some of the better bases as they pullback to key supports-especially our key 20 and 50 MA's.   2378 on the Nasdaq is a major inflectional pivot when you study the big picture charts.  There is little price resistance above the 2378 area until significantly higher levels.  In order to have the fuel to make that move a major base needs to take shape to provide the energy for that move and we see that potential setting up here once the market takes a well deserved breather.

For those playing the IPO's off the IPO Corner EXLS which has been highlighted the past week made a nice 39.5% out of the gate move today during its debut.   Schwab was offering the play this week.  To be eligible for participation at Schwab you have to do 30 calander trades per quarter (considered an active trader) or have 100k in account equity.  They work directly with Goldman Sachs who continues to have a nice pipeline of quality IPO's.

Have a nice weekend!

Robert New