Technology bulls returned on Tuesday after a successful test of key support in the previous session, states Jon Markman, editor of Strategic Advantage.

The Nasdaq 100 index closed at 15,561, a gain of 0.7%. The rally for the benchmark puts the NDX in a prime position to renew its trek toward new highs.

Bulls have bought every dip since March to the rising 20-day moving average. They are going to continue to buy dips until there is no reward. That is the way markets work. After the close Tuesday, both Alphabet (GOOGL) and Microsoft (MSFT) reported profits and sales well above forecasts. Shares of Alphabet jumped 7.2%, while Microsoft was 1.1% lower.

More importantly, to us at least, our position in global assets indexer and ETF creator MSCI (MSCI) jumped 9.04% after the company reported earnings that exceeded expectations. The stock needs to advance another 4% to exceed its one-year high, and then 20% to reach its all-time high of $669. That’s a big ask but my model suggests it could happen over the next year.

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Bears often argue that extensive technology stocks are too richly priced. This analysis is superficial. Alphabet posted second-quarter sales of $74.6 billion, up 7% from a year ago. Gross profit margins are 55.5%. More importantly, its Google Cloud division is now on a $32 billion run rate, up 28% year-over-year. The business entered the fight in 2015 for enterprise clients. Investors have bid up shares of tech companies because they are growing fast, executives can invent new revenue streams quickly, and they are at the vanguard of the new global economy.

The enterprise world is rapidly moving toward some form of cloud-based data computing, storage, and analytics model. The biggest cloud players in infrastructure, platform, and software applications are set to divvy up trillions in the years ahead. The stocks are cheap given this likelihood. Unless there is a giant reset of expectations, bears are in big trouble.

They are simply running out of narratives to support lower stock prices. There is critical support for the NDX at 15,330, the rising 20-day moving average. There is minor resistance at 15,932, the July 19 high, with more important supply at 16,573, the record high.

NASDAQ 100 Timing: Members bought ProShares Ultra QQQ (QLD)—a 2x leveraged ETF that tracks the Nasdaq 100—at $63.00 on June 28, and sold the first half of that position on July 19 at $70.59, a gain of 12.1%. Now set up to sell the second half at $75.70 lmt gtc. Set stop at 64.53 stp.

Learn more about Jon Markman here...