Monday, March 8, 2010

Rally Reigniting

The S&P 500 Index is higher by almost 8% since February 8th. It’s climbed back to 1,138, just shy of the 1,150 closing price on January 19th, which was the high for this cycle (so far). Other market segments have already broken above their mid-January levels, including small-caps, mid-caps, and the Value Line Index.

In addition, internal market indicators appear to be very favorable. The market’s advance/decline line made a new cycle high on February 19th. As of Friday, there was only 1 stock that made a new 52-week low on the New York Stock Exchange, indicating that selling pressure is basically nonexistent. And while the bears continue to complain that overall volume is low, a separate measure known as On-Balance Volume continues to be strong.

The cumulative message from all of these indicators is that the market rally that began almost exactly one year ago continues to be on solid ground for now. Of course, we’ll be watching very closely for any signs of deterioration. While we believe the market can work higher from here, we’re also fully aware that the largest gains may now be behind us, meaning that we cannot allow ourselves to grow complacent.

Chart: Bloomberg NYSE Cumulative Advance-Decline Line