We mentioned last week that our long-term system has already confirmed the bottom from the middle of July. Today, when looking at the performance of the Russell 2000 and the NASDAQ Composite, we receive even more confirmation that the bottom was definitely for real. We had no doubt that the bottom was in July when our long-term system confirmed it two weeks ago, but additional confirmation certainly doesn't hurt.

The first chart is of the NASDAQ 100 ETF - QQQQ. Over the past several weeks we have mentioned the resistance areas that needed to be reached and broken in various indices to know for sure that the bottom was in July. Two weeks ago QQQQ reached our confirmation point of 39. A break of this area would push QQQQ to the 40 area, before a move to 40.50, 41.00, and eventually 2006 highs.  The fact that the ETF was able to hit 39 two weeks ago means that one more confirmation level is down.  At this point, if the  ETF does not treat 39 as resistance, we foresee a move to 40 in the very near future.  A pullback from here would certainly be healthy. As we have reached the 39 area, a pullback should not be feared. If the ETF could not reach 39 before a pullback, we would have reason to be alarmed.

The next is of the NASDAQ Composite. You can see how the index hit another confirmation level today. In fact, today's high was the confirmation level. From here, the NASDAQ needs to break the 2235 area before the initial push to 2006 highs.

The next chart is of the S&P 500. The S&P 500 has already reached all of our confirmation areas. Now, we are just waiting for the index to hit resistance at its 2006 highs, before a push beyond them.

The last chart is of the Russell 2000. The Russell 2000 finally broken above one of its resistance levels today, the downtrend line from June. Next, the Russell 2000 needs to break the 730 and 740 area before a test of the 2006 highs.

It is important to understand the relevance of these confirmation levels. When an index hits a resistance area, we can lay back and feel much more comfortable with any downside pressure. Downside pressure is expected at resistance levels and should not be treated as negative. It's when an index (or stock) is unable to hit a resistance area before a decline that should cause some worry. The markets are acting extremly healthy, and we believe the long-term trend will most likely continue higher for many months.