The stock market has taken a pause and a short-term pullback has started. It is possible that this pullback ended today, although it is more likely that the indices fall around 1% from here, before continuing the uptrend.

The first chart is of the NASDAQ 100. This annotated chart was shown last week. You can see how the Bollinger Band Width indicator has begun to reverse direction, suggesting that volatility may continue to fall and more sideways to slightly down action will continue. Once this indicator decreases we believe another move higher will start. Our system almost triggered a sell signal at the top last week. As it did not, we expect only a short-term pullback and the NASDAQ 100 to push above 2006 highs before a mid-term top is in. We believe support sits around 1% lower from here.

The second chart is of SMH. SMH is sitting right on its 200 day moving average, suggesting that the bounce is about to begin. It is quite possible for the ETF to break this line and fall to the 36 area, before resuming its uptrend. Currently, we do not foresee a fall below 36.

The next chart is of the Russell 2000. You can notice how the Russell 2000 can also fall around 1% from here and still be above the lower uptrend line in its trend channel. It is quite possible that the index will fall to this line and we believe if this happens, it will bounce off the line and continue its uptrend, just like it has done twice already.

The final chart is of the NASDAQ Composite. This chart strongly suggests that the short-term pullback is over. It is currently sitting at support from its recent breakout. If the index does break lower from here, support will be in the 2300 area.

We believe that the indices are either done with their short-term pullback or only have around 1% lower to fall from here. Regardless of if the short-term pullback is over, the mid-term uptrend is still intact.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC