We continue to believe that any additional downside in the stock market will only be a correction within the larger uptrend and not a new downtrend. The market did stop its fall the last two days, but as the indices are sitting on rather weak support levels currently we believe it is possible for them to fall further before the uptrend resumes.

The first chart is of the NASDAQ Composite. We are using this chart to show where we believe the index is likely to fall if the downtrend continues. Generally speaking, we feel that the indices will likely end their decline on their 200 day moving averages or at the major support levels slightly below them. In the case of the NASDAQ Composite, the 200 day is currently sitting right between strong support. We believe the index will fall to this area if the downtrend resumes.

The S&P 500 has at least found a short-term bottom on the heavy support level of 1375. If this is not the bottom we feel it is possible for the index to fall to the 1325 area. The 200 day moving average is around 1350, but as there is little horizontal support in this area, if the downtrend resumes we would not be surprised to see the S&P 500 fall to the 1325 area.

Any additional weakness should bring the Russell 2000 to either the 740 or 750 horizontal support areas. The 200 day moving average is a few points below 750 and should help stop a further decline.

The most important thing to remember right now is that we believe we are in a correction within the larger uptrend. We believe that the long-term uptrend is still strong and the recent weakness will allow for much higher gains in the months ahead.