Nasdaq Composite

The equity market, as depicted by the Nasdaq Composite, continues to display churning consolidation. This is illustrated by volatility (violence), numerous gaps, and heavy volume. Is the churning consolidation a precursor to a trend change? The answer to this question is dependent on force and time.

Time is still wrong for a major top, but a correction to lower levels is still possible. The force behind the test of support and resistance gaps and zones will support further correction or continuation of the March 2009 rally.

The contraction of volume since the May 05 decline suggests that the downside correction is losing energy. A retest and close above the March 05 gap around 2300 on shrinking volume would be a bullish setup. This would favor continuation of the March 2009 rally. Please note that the force of the May 05 decline was so strong that it could require several small retests.

Nasdaq Composite with exchange volume: