Nothing has changed since last week. The stock market is set up for a huge rally, but we feel that there will be a pullback before the rally begins. The NASDAQ 100 continues to push higher, beyond its breakout point, and has yet to slow down. When running our long-term system we can see that the market is slightly overbought in the long-term, but not very close to a sell signal. A strong weekly close followed by more strength next week could signal the end of this buy signal. More likely, the stock market will pullback in the coming day or two.

The NASDAQ Composite has broken above its recent inverted head and shoulder formation and has continued to push higher. We have shown three blue uptrend lines on the chart to point out how the trend is getting steeper each time. This signals that a pullback should begin momentarily. If a pullback does not begin soon we will either have a sell signal or more likely, the coming pullback will be much larger than we are currently anticipating. We currently believe that we will fall no more than 5% from here, but continued strength may lead to a harsher fall. For the purpose of the long-term trend, a pullback is preferred here.

The S&P 500 is right underneath all-time highs. It is possible that the index will not be able to push any higher without a pullback to the 1512 to 1516 support area. We have shown the recent uptrend with a blue line. A break of this line will likely signal the beginning of the coming fall.

The Russell 2000 is almost to all-time highs. It has rebounded quite quickly. If the Russell 2000 does continue its move higher here, we see a temporary top in the 851-853 resistance area.

The stock market is extremely overbought when looking at a daily chart and is ready for a reversal. The long-term trend is strongly intact.