In the bulls favor is the healthy amount of leadership stocks that have gapped up on earnings and held their gaps. Many institutional quality stocks from slower stable earnings plays to high flying growth types continue to make higher highs. This is healthy and needed for the market to sustain an uptrend. The difference now versus the last few months is the confirmation in multiple indexes into new highs. The S&P, Nasdaq, Russell 2k, and Mid Caps all are trading into new high territory. While the DOW and NYSE are lagging, having the other four confirm is good news.
The bad news is we are still constrained in a giant channel limiting upside progress. This has been the case for roughly 3 years. Once we trade to the upside channel the market has tended to become overbought and ripe for a pullback. As we see it, the market has started to show some of those signs on our indicators. Also, upper channel resistance remains above current levels but not by much. While breaking out of the channel to the upside is always a possibility the higher probability play has been to fade these areas.
Below is a weekly chart of the S&P since the end of 2011 highlighting the channel support and resistance.
