To be sure, there are a few problems such as the questionable performance of some typical bull market leading sectors like financials in particular. But with the proxy for the “average stock” -- the New York Stock Exchange Composite Index – hitting new highs and market breadth still quite positive, it’s hard to fight the tape (see Chart 1).

Chart 1

NYSE Composite

Tuesday, the NYSE Composite finally edged above the resistance zone in place since July of last year. While relatively low volume continues to confound chart watchers, momentum is still strong and all measures of the trend, from simple moving averages to complex directional movement indexes, are positive.
While I find the breakout in this index to be the most important, many are focused on the Nasdaq’s quest to recover its 2000 technology bubble high with the 5000-level seemingly the next stop. (See Feature, “To Nasdaq 5000 and Beyond,” Feb. 21.)
As we can see here, the recent breakout from the November-February trading range has been nearly a straight-line advance. The index rose for 10 consecutive days before ending barely lower Wednesday, down 0.98 points, or 0.08%, to 4967.14 (see Chart 2).

Chart 2


The near-term objective for the breakout is in the 5061 area, which is the height of the range projected up from the breakout. That is in the zone between the all-time intraday high of 5132.52 and all-time closing high of 5048.62 – a rather important resistance.
Clearly, it is not a bold call to look for the Nasdaq to get there soon. What may be more important is how it acts when it does. If sellers come out in droves to take advantage of the end of a 15-yearlong saga, then the index will be rejected. If only moderate selling pressure emerges, then we can look for another leg up, possibly to 5122 – the second integral multiple of the range height.
Again, that is a bridge to cross at a later date. Indeed, the market has not had even a small pullback all month and may be due for one soon.
In December, I looked at several indicators supporting higher stock prices in the first few months of this year (see Getting Technical, “Two and a Half Reasons to Like Stocks Now,” Dec. 24, 2014). The two reasons are still valid although the half reason never fully formed.
The first is the junk bond market, represented by the SPDR Barclays High Yield Bond exchange-traded fund. Simply put, it has been rallying nicely since the start of the year to move above the trendline that guided it lower for much of last year.
This is important because junk bonds have traded more like stocks than bonds over the past few years. They are the ultimate “risk on” instrument. Therefore, when investors are feeling feisty they are comfortable with the higher risk and potentially the higher return found here.
The second is a measure of offense versus defense now at play in the market. In December, I looked at a complex ratio of sector ETFs, but now we can assess the market’s mood via a simpler ratio of the Select Sector SPDR-Consumer Discretionary versus the Select Sector SPDR-Consumer Staples (see Chart 3).

Chart 3

Discretionary/Staples Ratio

The chart shows a clear upside breakout through a one-year trendline and that is bullish.
Earlier this month, I looked at several other indicators to conclude the stock market still had upside ahead (see Getting Technical, “3 Key Reasons Why It’s Safe to Buy Stocks Now,” Feb. 9). Two of those three are still very much in place and the third, the correcting Treasury bond market, is still following its script leaving no surprises to scuttle the bullish trend.
Most important is market breadth. More stocks are going up each day than down. And the number of stocks reaching 52-week highs continues to swamp the number hitting new lows.
The final indicator is seasonality. March is one of the strongest months of the year on average and that, of course, bodes well for the bulls here in the final week of February.
Of course, no market moves in a straight line. And with the Standard & Poor’s 500 up over 6% in February with nary a stumble, a small correction is a real possibility. Indeed, a 1% dip just to test its breakout above the prior all-time high set in December would be a welcome pressure release.
With new highs spread across sectors and capitalizations, the rising trend remains in place until real evidence emerges to refute it.

Michael Kahn, a longtime columnist for, comments on technical analysis at A former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, Kahn has written three books about technical analysis.