The stock market continues to rise with sentiment indicators mixed. Public short sales made an all-time high last week and short interest is at the high level of 7%. Meanwhile, the Investor's Intelligence survey is steadily picking up more bulls and losing bears each week. Market Vane is also reporting a large percentage of bulls. With sentiment indicators mixed, we feel very strongly that this rally will continue for a much longer period of time, but as some indicators are continually creeping higher, a pullback is most likely in order in the near future.

The first chart is of the NASDAQ Composite. This is the same chart we showed last week. You can see that the index has still not hit the upper end of its trend channel and that the RSI indicator has still not broken above 70. This provides additional support that the index will be moving higher before a larger pullback. We see the NASDAQ with an RSI indication above 70 and in the price level of 2350-2375 before a pullback.

The S&P 500's recent rise has created a more aggressive trend line. The index has also been in a rectangle formation the last few trading days. With optimism increasing (faster price action as seen by the new trend line), we believe the S&P 500 has one more push to new highs before a larger pullback.

The Russell 2000 has been lagging and the RSI indicator is far from overbought. We believe that the index has to show more strength before a pullback. Resistance levels are shown on the chart. The 770 area is a possible target before a correction starts.

Even if the market indices correct in the coming trading days or weeks, we feel any correction is healthy and is not the end of the recent bullish move.