The NASDAQ Composite, NASDAQ 100, and Russell 2000 have continued to consolidate this week, while the S&P 500 has continued its move higher. As we have mentioned in past commentaries, the recent sideways action relieves the stock market's recent overbought condition and allows for continued strength higher in the weeks and possibly months ahead. With the 50 day moving average approaching the current price of the NASDAQ 100, NASDAQ Composite, Semiconductor Index, and the Russell 2000, we feel the new leg higher should begin very soon.

You can see from the first chart that the NASDAQ Composite formed a cup formation from April-October of 2006. The index broke out of this formation in November and has recently formed another base. If we assume that the height of the breakout from the cup formation will be the same as the height of the cup, we could see the NASDAQ Composite moving to the 2650-2700 area before a sell signal occurred.

The second chart shows the S&P 500. You can see how the index is heading toward our next target. It is quite possible that we will need to set a higher target before our system triggers a sell signal.

The Russell 2000 is right below all-time highs. You can also see how the index bounced off of its 50 day moving average yesterday. We believe that yesterday ended the short-term pullback in the Russell 2000.

Even though our gains have been strong this buy signal, we feel that the stock market still has much room to grow in the months ahead.


Happy Holidays from the Nasdaq Wizard Staff!