We are at a crucial point in the stock market. The Russell 2000, NASDAQ Composite, and NASDAQ 100 are near there recent lows and are possibly forming a double bottom formation. If the indices have a break below recent lows the downtrend will continue and it will become clear that the bottom is not in the area where we thought it would be. Even though the possible double bottom formation is in its infancy, we believe it will be the likely pattern carved out in the coming weeks.

The NASDAQ Composite's recent low was right above the lows at the end of November. Today, the index closed right at its 200 day moving average. It is extremely important for the index to have a powerful move higher in the coming few days. We need the index to have a clear break above the 200 day moving average and being its thrust forward if we are to believe that a double bottom pattern is forming. Any stalling here will likely lead to lower lows. If our prediction is right, the NASDAQ should have its first stop in the 2700 area.

The Russell 2000 has a similar formation. The index had an outside day (low being lower than previous day and high being higher than previous day) yesterday and this is definitely a bullish signal.  The next major stop should be in the 800 area.

The NASDAQ 100 also has a similar formation. The index found support at 2000 yesterday and is likely carving out a double bottom pattern. If this is correct, the next significant stop should be around 2125.

Markets with low volatility (which has been the environment for four years now) require an extreme level of patience. Fortunately, our work suggests that we are now coming out of the correction and there should be gains ahead in the coming weeks and months.