The stock market has been consolidating for the last few weeks. After the strong uptrend that started in July, it is not surprising to see the market take a few weeks off. From a technical point of view, this consolidation relaxes the overbought condition that was beginning to be formed in the middle of November and subsequently allows for higher prices in the weeks and months ahead. As long-term investors, we look at consolidations as healthy and necessary for the trend to continue.

The first chart is of the NASDAQ 100. The NASDAQ 100's consolidation is in the form of a symmetrical triangle. You can also see how the 50 day moving average is growing closer to the current price. If the index breaks lower from this formation, the 50 day moving average could stop the fall, although it is unlikely. At this point, breaking below the uptrend line would most likely have larger bearish implications. Not a long-term sell signal, but it could be the beginning of a correction. You could also look at the recent formation as a double bottom. The first bottom being at the end of November and the second was reached a few days ago.

The S&P 500 is still charging higher and we have officially moved above our old resistance lines. The more recent resistance lines are shown on the chart. We feel that the index will move here at a minimum this buy signal.

The 50 day moving average of the Russell 2000 is also quickly approaching the current price. We do expect any fall to find support on this indicator.

Volatility has greatly decreased the last four weeks and we believe that the stock market is ready to begin its next move higher.