Since our buy signal almost four months ago, the NASDAQ 100 and Semiconductor Index have had a small gain, but so far the Russell 2000 is leading with over a 10% gain. We often talk about how to decide your ETF allocation each buy and sell signal. With this current signal you can see why we recommend having all three ETFs in your portfolio. Even though you may choose to only allocate 15% or 20% to the Russell 2000 (as the index usually underperforms the other two), you can see why it is important to invest in all three ETFs each signal.

The NASDAQ 100 is preparing for its next upmove. Even though the index could fall to the 1700 area in the short-term, the Bollinger Band Width indicator strongly suggests that a more volatile and powerful move is coming. The index bounced off of our horizontal support line around 1680, which also marked the 61.8% retracement from the March bottom. A break of the 1725 area should bring the NASDAQ 100 to the 1745-1750 area. From there we should get a push to new 2006 highs.

The next chart is of SMH. You can see how the ETF broke our pink downtrend line from last week. It also fell back to its 38 support, suggesting that a bounce will be coming very soon. We could see a fall to the 37.50 area, but the ETF should be able to stay above that level. A break of 38.50 should send the ETF to 39.00-39.10.

The final chart is of the Russell 2000. Nothing new here. The Russell did bounce off of its uptrend line and has now moved significantly above it.

The NASDAQ 100 and Semiconductor Index have not played a huge role in the recent rally, but soon that should change.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC