Market Set to Test Breakout at January High

Last week continued the market bounce, especially in the leading Nasdaq Composite which closed up for its 7th consecutive day. The Nasdaq gained +2.8% for the week; the S&P rose +2.3%, and the Dow was up +2.28%. The Dow managed to get above its 50 EMA, and the S&P has remained above its 50 EMA. Volume was above average for the week.

This coming week, the market may retest the January high of 4,246. However, after such a strong run up, it may pullback to check support at the 10 SMA. As long as the pullback is on relatively lower volume, the market can continue in long mode.

However, a high volume pullback would be a caution, since any retest of a prior high that fails could lead to a double top formation and a deeper decline. If this is the case, also watch for stocks making failed attempts to breakout, or breakouts that make a sudden turn down.