With the Nasdaq hitting key resistance around the Jan highs in the past few days, cracks appeared in the massive March/April rally today with the first day of distribution in nearly a month.  The “sell the news” move in Goldman (GS) today and likely Intel (INTC) tomorrow is telling.  One day of higher volume selling won’t derail this rally and bulls remain in control for now, but as I mentioned in my report to members last night, the long side is increasingly becoming a dangerous place to play. 

Here’s a look at the daily chart of the Nasdaq with 3 things standing out to me – the test of resistance at the Jan highs, the sharp V shaped bear market rally off the March lows and the overbought conditions as revealed by stochastics.  It all adds up to fertile ground for shorting opportunities!

I still believe there is some chance of another move higher of a few percent, but this rally is nearing the tail end.  I’ll be keeping an eye on the hourly chart for confirmation that the rally is done.  The white line is support of the upward trend line off the March low which coincides with the 50 dma, making the area around 32 – 32.20 a strong level of support.  Take that level out with big sell volume and this rally is most certainly finished.