NDX update (2)

thumb_9.11.09_index_ndx_w_--_nasdaq_100A couple of weeks ago, NDX almost closed the September gap (1672) and proceeded to drop on volume for four days. However, bulls rallied back (on lower volume) to actually close that gap and some, approaching another key level of resistance, namely the 200 weekly moving average (1693.40) and perhaps more importantly, confluence 38.2% 2002/2007 at 1687.63. Bulls were unable to close above 1687 on both Thursday and Friday, setting the stage for another fierce battle next week. The 200 weekly moving average was support in March 2008 and resistance in September of 2008, as it was last week. The ascending wedge keeps tightening, smaller candles as we move higher, creating a coil that should produce heavy velocity soon. We are only 17 points higher than the August 28th high, on below average volume and very overbought weekly readings. Sentiment remains extremely optimistic, most bears have probably completely thrown the towel by now and the recommendation to trade light with caution still stands.