an tSionna 3.12.10 S&P vs. Nasdaq

Chart of the S&P 500.  Double Click to enlarge.

Chart of the Nasdaq 1000 {Q's}.  Double click to enlarge.

I thought for a change I'd publish two charts side by side so you could see how other ETFs are trading.  While the patterns are similar, Q's have slightly outperformed S&P year to date and throughout this rally.

Both have rallied through resistance and both are over bought.  Q's rally seems more definitive at this point but both closed weaker on Friday.  In either case I think we'll be able to derive some important clues as to the next stage by how stocks react to the January high resistance levels next week. 

If we push higher in both indices then chances are that we are in the process of establishing a new price floor  {resistance} which would set the stage for higher prices sooner or later this year.

If we stumble and fail here though that would be much more indicative of a market that has simply rallied into resistance.  Probability would suggest then stocks still need time to consolidate their gains from last year.

I'm always reminded of the consiglieri's admonition that "Stocks will do what they have to do to prove to most amount of people wrong".  This market is so hated by individuals and the professional investing class that I think the direction of the most pain is up.  I melt up would be to obvious but a market that tacks on say a quarter a percent a day or so while remaining over bought would give folks no opportunity to get invested.  

Since we are up so much and over bought by our measurement, our short term stance is still net market neutral.  We are net market positive in our longer term orientation for the market and for certain market sectors.

*Long ETFs related to both the S&P 500 and Nasdaq 100 in client and personal accounts.