The stock market has continued its long-term and mid-term range-bound action by spending most of last week in the red and erasing most of the year's gains. The recent fall has also broken some of the recent support lines we have mentioned in our commentaries. Regardless, our model is still long and from a subjective point of view, Friday and today probably marked the bottom of the recent decline.

The first chart shows the NASDAQ Composite. Starting the end of March, a double top formation started to form in the index. Usually the stock or index will fall the same distance as the height of the double top. We have used Fibonacci lines to show where that would bring the NASDAQ Composite, just slightly above today's low. We are also right underneath the breakout from the trendless market (2240 area) and are sitting on top of the 200 day simple and exponential moving averages. All of these facts lead us to believe that the bottom is in.

The second chart is of the NASDAQ 100. Today the index's low was at the breakout point from the recent trendless market. This should serve as strong support. In addition, the index has broken both of its 200 day moving averages. Moving averages are so often used and looked at that it is hard to put a lot of weight in them. Generally speaking, I don't like to see a stock or index under the 200 day for more than two days. These days the area right underneath the 200 day moving average serves as stronger support than the 200 day itself.

The next chart is of SMH. You can see how SMH has had either one or two full days underneath its 200 day moving averages so far (depending on which one you are looking at, simple or exponential). You can also notice how it looks like the ETF is developing a possible double bottom. If SMH is going to rebound anytime soon, it would really need to happen tomorrow. Wednesday at the latest.

The last chart is of the Russell 2000. Yes, the index has finally broken its uptrend channel, but this is not necessarily a problem. This only suggests that the index is beginning a consolidation period. The 38% retracement from the October incline is a little over a percent below today's low. Horizontal support is in both the 720 and 730 areas.

Being a successful investor or trader involves patience and discipline. Even though we would have much larger gains if this sideways action would end, we have no choice but to take what the markets give us. Eventually volatility and a simpler market will return.

Take Care,

Stephen Brown
Founder of Nasdaq Wizard, LLC