The rude health of the Nasdaq has been evident by the strength from its internals; 74% of constituents are on point-n-figure buy signals, 71% are above their 50-day MA and an incredible 80% are above their 200-day MA. Such conditions can’t continue forever so what should one be looking for? br /br /During the depths of despair encountered over the latter part of 2008 the percentage of Nasdaq stocks above their 200-day MA languished below 10% for the best part of 5-months. The percentage of stocks above their 50-day MA enjoyed a brief rally from 10% to 70% before heading lower. While the bullish percents struggled to challenge the 50% mark.br /br /a href=”http://1.bp.blogspot.com/_WWGUfU1tOjI/SsM17-vkMuI/AAAAAAAABCI/CRBVt0AoA3o/s1600-h/NASISep30.png”img style=”display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 246px; height: 320px;” src=”http://1.bp.blogspot.com/_WWGUfU1tOjI/SsM17-vkMuI/AAAAAAAABCI/CRBVt0AoA3o/s320/NASISep30.png” border=”0″ alt=”"id=”BLOGGER_PHOTO_ID_5387208883836302050″ //abr /br /span class=”fullpost”If one was to flip this scenario on its head and apply it to the courent situation. the likely view going forward is the next 4-5 months will see the Nasdaq break lower with sizable downleg, perhaps taking it to a wide band of support running between 1,650 and 1,750. From there it will mount another challenge on September highs – possibly breaking through to continue the rally. br /br /It’s highly unfeasible the Percentage of Nasdaq Stocks above their 200-day MA will drop below 50% (this would require a crash-like move in the market); so expect this to meander in its upper range as stocks remain well above this key long-term average.br /br /There is greater potential for a reversal in the Percentage of Stocks above the faster moving 50-day MA and Bullish Percents given the tight daily action of recent weeks will have set-up new point-n-figure signal-conditions and allowed time for the 50-day MAs to catch up with price action – making the latter vulnerable to breaks. br /br /There is little to suggest the next major move down will not set-up another good tradable rally higher; perhaps overshooting a little past the 200-day MA. The May reaction low c1,664 is looking a good place for bulls to put up a defence. What happens on the second attempt at September highs will dictate market conditions going forward. br /br /I have entered a a href=”http://www.zignals.com/main/stock_charts/try_stock_charts.aspx”Zignals Call/a for a push down to the low $33s for the QQQQ with a stop on a break of September highs. br /br /a href=”http://1.bp.blogspot.com/_WWGUfU1tOjI/SsM5TepuzoI/AAAAAAAABCQ/XBqNeuX711s/s1600-h/QQQQSep30.png”img style=”display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 214px;” src=”http://1.bp.blogspot.com/_WWGUfU1tOjI/SsM5TepuzoI/AAAAAAAABCQ/XBqNeuX711s/s320/QQQQSep30.png” border=”0″ alt=”"id=”BLOGGER_PHOTO_ID_5387212586073640578″ //abr /Over the near term, look for the narrow action to continue until there is a decisive break of the Nasdaq 50-day MA. br /br /Follow us on a href=”http://twitter.com/Zignals”twitter here/abr /br /script type=”text/javascript” src=”http://feeds.delicious.com/v2/js/Zignalsnews?title=My%20Delicious%20Bookmarksicon=mcount=5sort=datetagsextendednameshowadd”/scriptbr /br /span style=”font-size:80%; color:#cccccc;”Dr. Declan Fallon, Senior Market Technician, a href=”http://www.zignals.com”Zignals.com/a the free a href=”http://www.zignals.com/main/stock_alerts/try_stock_alerts.aspx”stock alerts/a, a href=”http://www.zignals.com/main/stock_alerts/try_stock_alerts.aspx”market alerts/a, a href=”http://www.zignals.com/main/stock_charts/try_stock_charts.aspx”stock charts/a, a href=”http://www.zignals.com/main/stock_screener/try_stock_screener.aspx”stock screener/a and a href=”http://www.zignals.com/main/portfolio_manager/try_portfolio_manager.aspx”stock portfolio manager/a website /span/spandiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/3415040392614486358-905150868345452202?l=zignalsblog.blogspot.com’//div

Last 5 posts by Declan Fallon

• Creating a Trading Strategy in Zignals - November 10th, 2009
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• NASDAQ Sep 22nd 2008: 2,179 - Sep 22nd 2009: 2,146 - September 23rd, 2009
• ISEQ Bull Rally - September 16th, 2009
• Sep 9th: PG - September 10th, 2009