Not a bad start for 2007…

In January, the Dow Jones Industrial Average advanced 1.30% from open to close. The Nasdaq Composite gained 1.50% and the S&P 500 moved 1.43%.

Is this a gauge of what to expect for the rest of 2007?

According to Stock Trader's Almanac, this January barometer “reinforces” the group's 2007 forecast for gains of 10-15% in 2007, which at the high end of its expectations would bring the Dow up to 14,327, the Nasdaq up to a value of 2,791, and the S&P 500 to a worth of 1,630.

Those are some strong predictions.

Even at the low end of its forecast, the Dow would rise to 13,704, the Nasdaq to 2,670, and the S&P to 1,560.

UBS Investment Research, as cited in Barron's Online, is taking the more conservative approach and anticipating an S&P value of 1,500 by year-end. That's not really going out on a limb, now is it?

According to UBS Investment Research, the S&P is fair valued, trading at 16 times the research firm's 2007 earnings-per-share estimate of $90.

Among its comments:

“Digging deeper into the data, we found that longer and more runs of consecutive positive-gain months generally occurred during periods of low volatility and were followed with positive returns after a small correction…. January was the first eight consecutive months of gains since June 1996. There have been only three instances of nine-month or longer runs since 1950. Low volatility helps to make for longer runs. What breaks or continues this run is likely modest.”

That's all good information for the next year. But the index I like the most right now is the Nasdaq Composite Index (IXIC).

This heaviest-weighted technology index is at the most pivotal value since late 1998. Currently, the Nasdaq Composite holds more than 3,000 companies at an index value of 2,475.

The IXIC weekly chart shows that its 200-week Moving Average has finally provided the necessary support that's part and parcel of any past tech rally.

Compare the two different chart positions:

In late 1998, the Nasdaq touched its 200-week Moving Average near a value of 1,591 and went on to gain over 217% by early 2000, to a high of 5,132. We saw a swift drop to levels near 2,017 in 1998. Then from 2003 to the late 2006, the Nasdaq slowly gained all positive support and created a platform for a new rally. It was slow, but steady.

Now the Nasdaq is at the same juncture as 1998. If the Nasdaq begins to rise again off of this supportive platform, you could see the Nasdaq Composite hit a new high of 6,584 by the end of 2009 and going into 2010.

Now that's a prediction! Even the daily chart is showing promise, as the Nasdaq has gained 1.68% just this week.

Do I think it's possible? Of course. Tech stocks are on the rise this year, exiting their autumn season (when inflation rates drop dramatically and a shakeout of tech companies occurs due to slowing growth) and entering their winter season (when the productivity and supply of new technologies are at their highest point.)

This is part and parcel of the K-Wave theory, introduced in the early 20^th century by Nikolai Kondratieff.

Combine this with Harry S. Dent's research that baby boomer spending is hitting its peak by 2010, and you have a great bullish argument for tech stocks.

Finding the right tech stocks right now to invest in could be hard, considering that a shakeout is still occurring and M&A activity is increasing in the industry, but you could always opt for some extremely long-dated calls on the Nasdaq-100 (QQQQ).

Have a good weekend!