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.

Now that’s the type of move you want to see when breaking out of a major downtrend line. I mentioned recently that I wated to see the market bust through that line with force. We definitely had the market internals confirming that. Up volume for the Nasdaq was 81% of 2.4 billion shares. NYSE advancers beat decliners by 24/10, and 20/9 on the Nasdaq. So what’s this mean? Well as long as the market holds above that Nasdaq breakout around 2425, the bias is bullish. Buying dips should be easier than shorting weakness. Of course we’ll use proper trading patterns for entry.

Now that the trendline on the Nasdaq has been taken out, we can target a measured move from the inverse head and shoulders pattern. Head to neckline was a little over 200 points. If we add 200 points to 2400, it conveniently targets a gap to fill near 2600. The market won’t go straight up, but longs should be easier. As usual, trading it one day at a time.