Conditions Dramatically Improve

Earlier this year Jim Cramer, who tends to be quite forceful with his opinions and whose opinions tend to change quite often, touted this 2006 market as the strongest market he had seen in six years. We tend to think he is right. This week things looked a little bleak and there were some legitimate reasons to worry that we were on the verge of a repeat of December's pullback. Last year breakout moves were frustratingly sold into and pullbacks like the one that began last week always turned into something worse as the market forced equilibrium. This pullback was not harsh nor was it frustratingly long. During this pullback accumulation indicators continued to diverge bullishly and poor reports from old the market leaders INTC and YHOO were used by smart money as buying opportunities. Yesterday the indices experienced a sharp reversal and the Russell 2000 small cap index forced yet another all time high. Today's scans confirm this move. We saw some of the strongest charts we have seen in quite some time. What we are now watching for is a NASDAQ 100 channel breakout. Recall that the QQQQ (NASDAQ 100) has been in an uptrending channel, but has been bumping against overhead resistance. If the trend is going to make some real strides, it will be necessary for the QQQQ to break out of overhead resistance allowing the trend to accelerate. The attempt to break this resistance that started January 2 was doomed to fail since it had not time to consolidate. Now we had a nice short pullback and volume has been strong creating a very good higher base of support. The set up is now in place for a breakout. Will it do so? Who know? What we do know is the set up doesn't get any better than this. A QQQQ weekly close over $43.30 would confirm an accelerated trend breakout.