The Dow is looking the healthiest.

Despite the stock market falling today and last Friday, the action has been quite healthy since last Monday's commentary. Contrary to what you may think, you do not need higher prices to have more healthy action. Some critical resistance areas were broken last week and the subsequent pullback has been pretty mild. Tonight we will be looking at six charts.

The S&P 500 still has the second healthiest looking chart (the Dow looks the most bullish). On Friday the market gapped higher, but ended with a lower close. The gap did break the resistance level we said was necessary to know for sure that the index was heading for at least 2006 highs, but as it was not a sustained break (the market broke above the level and fell quickly), we still have not reached confirmation. Regardless, the S&P 500 is still above the downtrend line that was cleared on Friday, above its 200 day moving average, and above the lower uptrend line from its most recent short-term channel (green lines). Friday's action suggests that we now need a sustained break of Friday's high for confirmation, not just a move above the 1290 area.

The Dow is looking the healthiest. This index also broke its necessary resistance on Friday, before an unfortunate pullback. Regardless, the Dow has also cleared its downtrend line and is in an extremely clear double bottom formation. A sustained break of Friday's high is now needed to confirm that 2006 highs will be reached at a minimum in the near future.

The Russell 2000 is back into the middle to lower area of its triangle formation. It has been able to stay above horizontal support at 690 and its recent short-term trend channel (green lines). The Russell 2000 still has a far way to go before we can say that it is headed for 2006 highs.

We showed the next chart in last week's commentary as well. It is SMH divided by DIA. You can see how important resistance was broken on Friday, but SMH:DIA fell back into the channel. As it is currently touching the upper trend line, we can assume that a break higher will happen within the next few trading days. If this happens, we can predict that the Semiconductor Index and NASDAQ 100 (technology) may begin to outperform. This will suggest that the correction is definitely over.

The fifth chart is of SMH. All of a sudden, SMH is starting to look healthy. It has formed a clear inverted head and shoulder formation (very bullish) and the recent pullback has not hurt the pattern at all. A sustained break of Friday's high should lead to a powerful move higher.

Unfortunately, the NASDAQ 100 still looks terrible. There is not much else to say about this index. Support is in the 1475 area and it is necessary for the NASDAQ 100 to stay above this line. A break of 1475 will most likely send the NASDAQ 100 to 1450 at the very least.

The S&P 500 and Dow Jones Industrial Average are looking very healthy and SMH is beginning to form a strong base as well. Unfortunately, the NASDAQ Composite and NASDAQ 100 have yet to follow suit. If the more bullish indices break higher from here, we would certainly expect the lagging technology indices to increase as well.