The US stock market’s job this week is to make this break (Dow used as an example, as it broke upward on Friday, following the leadership indexes) to new highs stand up. What it’s got going for it is that it’s not particularly over bought and it made a weekly close above resistance. What it’s got going against it is a degenerating sentiment backdrop (toward an over bullish extreme).
If the breakouts in the Dow and other indexes holds up, the markets could be going much higher; including a long… not anticipated, but provided for… manic blow off scenario. Watch things beneath the surface having to do with sentiment, participation, breadth and one indicator that alerted us to the bull phase weeks ago, Junk bonds and bond spreads. Thus far, they do not show a negative divergence.
