an tSionna {4.30.11}

Market is giving the impression that it wants to break out from its roughly three month trading range.  Its action at the end of last week has taken it solidly above its previous high reached back in February.  Stocks as measured in the S&P 500 are up nearly 30% since this latest bull rally started back around Labor Day.  During that time there has never been anything near a 10% correction.  The closest we came to that was the market's 7% decline mid-February to mid-March.

The horizontal line measured in black on the above chart now is a new resistance level that we must mark.  We'll see how stocks respond to it in the coming days.  A market that at some point tests this resistance and bounces off of it would indicate that stocks could move higher in the coming months.  Likewise a market that retreats through that and is then unable to break back decisively above its levels could be indicative of a market that has more work to do in its digestive phase of the previous seven months gains.

One other thing to watch for that doesn't show up on these charts. I keep track of two moving average statistics, percentage of stocks above their 200 day moving averages and the percentage of stocks above their 40 day moving averages.  Both of these statistics are very elevated right now and have both reached levels from which stocks have traditionally corrected.  We will have to watch these carefully in the coming days as well.

*Long ETFs related to the S&P 500 in client accounts.