Breadth indicators were extraordinarily strong last week. The NYSE daily and weekly advance-decline lines hit all-time highs. The NYSE Unweighted Average, which eliminates the impact of large cap stocks, also hit an all-time high last week. Bears would argue that this leaves us no place to go but down. But, there are very few divergences in the market currently that indicate a selloff is imminent.
Various employment data shows continued improvement in the U.S., helping to support higher stock prices with the perception of economic recovery. As long as the employment situation continues to improve and recession risk remains low, US stock prices are likely heading higher.
The market continues to march higher in 2013 as the short-term to long-term trends and momentum for the S&P 500 remain bullish. The market is currently rallying on broad-based participation and thus is not showing any of the major warning signs of a significant top which is typically characterized by selectivity.
The Dow Jones, as well as a number of other equity indices, has recently achieved new all-time price highs. Was it really a question this would occur? We do need to remember we’re now just edging above price levels seen almost six years ago in 2007 and thirteen years ago in early 2000, and on an inflation adjusted basis we’re still close to 20% below old highs.
There is an endless parade of “experts” that will go on TV or send you a free copy of their newsletter telling you emphatically what is going to happen in the market. They will also tell you why what is happening shouldn’t be happening and give you an often complex reason for why things are happening.