Sometimes it's a really good idea to see where the markets are in relation to the longer trend. This helps to give us an idea of where the markets are in an overall cycle.
Of the three averages I track (IWN, QQQQ, and SPY), the IWNs have the most bullish chart. It's a simple 5-year rally with various consolidations along the way.
The SPYs had a strong rally in 2003. They sold-off in the first half of 2004. Then they entered a slightly upwardly biased pattern for the next two years. Here's the key: they broke through resistance, rallied, then fell back and slightly through resistance earlier this year. Now they have rallied from those levels.
This is still a fairly bullish chart, although all systems are not go. If the chart falls back through the upper channel line the overall 5-year rally could be in trouble. But the chart would still be within the channel started in mid-2004. If the average approaches the lower channel line, get a bit worried.
The QQQQs have a similar chart to the SPYs, although there is one key difference. They are currently forming a broadening top that is within the upper-channel line. In addition, the average is bouncing on top of support from a high set in early 2006.
However, if the average breaks below this trend line it will still be within the channel that started in mid-2004. Bulls should worry if and when the QQQQs start to approach the lower channel line.