We once believed that SMH was in a head and shoulder formation. The recent action has suggested that this is probably not true. It is possible that the October high was the beginning of a cup formation

Tonight we changed our mid-term signal to buy. It can be frustrating to have to accept a loss on the current signal, but sometimes this is how it works. The pullback in the beginning of November was to mild for our system to trigger a buy and unfortunately today's pullback came after a 6% move higher in QQQQ. It is possible for the market to still move a bit lower, but if we didn't change our signal here there would be a chance that we may miss the next leg higher.

The first chart is of QQQQ. You can see how the recent breakout point was at the 43 level. The uptrend line was also broken today. It is possible for the ETF to fall to the 43 level before the uptrend resumes.

We once believed that SMH was in a head and shoulder formation. The recent action has suggested that this is probably not true. It is possible that the October high was the beginning of a cup formation that ended two weeks ago. The recent activity could be looked at as a small pullback before a break above the October resistance. The 50 and 200 day moving averages should provide strong support. Only a break of the 33 area would suggest that the head and shoulder formation is valid.

IWM has fallen to its recent breakout point and one of our support lines. It is still possible for the ETF to fall to the 75 area, near the 50 day moving average.

Tonight out system has triggered a buy signal and we recommend all subscribers making the necessary changes before tomorrow's open.