First off, hats off to our troops and the brave people of Iraq who are providing inspiration to others in the Middle East.  Our troops must be proud.  Whether the news results in another forceful market rally is anyone’s guess at this point, although there is little doubt the market will open strong Monday morning.  While a sustained rally into the close on Monday would provide a signal to begin pursuing long positions, it should be met with caution.  Rarely do market corrections bounce back in a V like formation.  Corrections take time to sort out, often retesting the lows a second or third time before a rally can resume. 

Let’s take a look at the charts to get a look at where we’ve been and where we might be going.  Taking a look at the long term view of the Nasdaq, it’s clear that the area around 1980 – 2000 provides a critical level of support.  It’s an area of convergence of 3 major support levels: the psychological support level of 2000, the 200 day moving average around 1980 and the long term trend line which is also near 2000.  I believe we will hold above these levels, but if not, it could signal the end of the bull run.

A closer look at the Nasdaq.  In this view you get a better look at the short term downward trend line of this recent correction which has acted as a source of resistance.  For the rally to continue the Nasdaq will need to fight through this resistance level as well as resistance of the 50 day moving average.   Also notice that critical support area which was highlighted above in the longer term chart.