The weekly NASDAQ has broken out of a long triangle pattern. While a retest of the breakout wouldn’t be out of the question, the measurement of the triangle (450 points in light blue) indicates a NASDAQ target of about 2680.
In addition, the S&P 500 broke out of a rising wedge pattern. I have found that this rare pattern often leads to quick and outsized gains. That’s because many traders see a rising wedge as a bearish pattern. When it breaks up instead of down, it forces short covering which launches the index higher.
The rally remains healthy, as well. The NDX is leading this advance, which is usually a good sign of strength.
And even more impressively, the SOX is leading the NDX. The chart below shows the relationship between the SOX and the Consumer Staples. When investors feel good, they rotate into the higher beta and aggressive semiconductor stocks. When they are scared, the rotate into the defensive consumer staples. Right now, the SOX is leading by a wide margin.
So while many traders might nitpick with the overbought readings and rising optimistic sentiment, the dips will be bought until the character of the market changes.
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