Many of the larger cap indexes tested their 50-day moving averages  last Wednesday, with the S&P500 also testing the all-important 800 level.

Some of my longer-term technical analysis tells me that the recent rally is part of a large consolidation pattern, which could eventually come back down and test the recent lows.

The reason I mention this is that although the Dow and S&P 500 have gone low enough to satisfy their weekly charts, the Nasdaq Composite, the NYSE Composite, Wilshire 500, and the smaller-cap indexes did not appear to go low enough.

Also, the bear market that ended in 2002 took over seven months of consolidation before the bull market began. It’s only been about four months since the November lows. If history repeats itself, a lot of choppiness lies ahead.

If my “consolidation theory” is correct, watch for it in the Nasdaq 100 (NDX). Take a look at the chart below…

Note the two resistance lines – one at the January high and the other at the October high. If either of these two levels are tested and the indexes begin struggling around one of them, I would trade lightly until the move plays out.

Source: Ticker Of The Week: Nasdaq 100 (NDX)