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A Bullish Market Must Unwind 050508

Filed under: Stock Sector - 05 May 2008

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.

nasdaq-daily-chart-050508.jpg

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.

twm-050508.jpg

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