QQQQ, SMH, and IWM will suggest that higher prices are ahead in the short-term

Last week we said:

"It is possible that the market will have some sideways action in the coming trading days, but we still feel that this signal will be relatively short."

We believe that the sideways action should be just about completed. The stock market uses trendlessness to relax an overbought or oversold condition. In order for the market to become oversold on a mid-term level without breaking crucial support levels, it needs to slowly become more oversold while keeping the price action constant. Even though the market can become oversold to a point without much downside action, it cannot become oversold on a mid-term level without a decline in prices as well. Generally speaking, the market can only become oversold with sideways action in a short-term timeframe. Therefore, we believe that it is time for the market to decide its next action. The recent sideways movement could be looked at as a consolidation before a move higher, which would break above the current resistance levels. This is certainly possible. In this scenario we would have to wait a few more weeks before the market pulled back to the point that would give us a good entry into a new buy signal. The other possiblity is that the market will conclude this sideways movement by beginning to decline more aggressively. This would possibly put us into a buy signal by the end of this week or early next week.

To show these two scenarios, tonight we will be talking about the resistance levels that if broken on QQQQ, SMH, and IWM will suggest that higher prices are ahead in the short-term.

The first chart is of QQQQ. As long as the ETF does not have a sustained break above 39, we can assume that this sideways movement will resolve to the downside in the coming day or two. The support areas under the current price show a possible target for this sell signal.

The next chart is of SMH. A sustained break of 33.40 will suggest that the ETF will be moving higher in the short-term. Otherwise, we expect SMH to at least fall to the 31.70 area.

The last chart is of IWM. A break of the 71 area should push the ETF to at least 72, while a move below 69 should push IWM to at least 68.

We did expect sideways movement in the past week of trading and the next few trading days will tell us if we will be entering a buy signal in a few more days or in a few more weeks.