A Bullish Market Must Unwind 050508

The Nasdaq is currently trading at the top of a rising channel which began in early March. While the daily chart looks bullish here, it has probably gone too far too fast. Some basing action, or even a retest of the breakout area around 2425, would be healthy. I won’t be surprised if trading is choppy the next few weeks.

It should be noted that the double short index ETFs such as TWM, QID, and SDS are winding tighter at the bottom of their wedges. Here’s a chart of TWM. I have also marked the recent pivot trading ranges. Note the equal moves lower.  I’m watching these ETFs on the long side for a break of those trendlines.