Don’t Bet Against the Current Market

The current market continues to be one that you just don’t want to bet against, especially from the short end. The blue-chip DOW broke above 12,800 on February 15 and continues to indicate that more upside moves lie ahead, as the trend remains positive. The same goes for the NASDAQ, S&P 500 and small-cap Russell 2000.

Market sentiment has been one area that has been quite positive. To examine this, we look at the new-high/new-low (NHNL) ratio, which measures the number of stocks touching a new 52-week high versus the number of stocks that have declined to a new 52- week low. The theory is that, in a bullish market, investors quickly bid up stocks and you see a rising NHNL ratio. When the ratio is above 70%, it’s considered bullish.

The daily NHNL on the NYSE remains bullish, with 118 of the last 125 sessions above the bullish 70% level. On the tech front, the NHNL ratio for the NASDAQ has been stronger over the last several weeks with 15 of the last 17 sessions above 70%.

The near-term signals for the NASDAQ remain bullish. The Relative Strength is just above neutral. The NASDAQ is trading above its 20-day MA of 2,458 as well as its 50-day and 100-day MA of 2,448 and 2,400, respectively. The index is also above the 200-day MA of 2,277. Upper targets include the 52-week high of 2,508 and the 14-day 70% RSI at 2,556.

On the blue-chip side, the near-term technical picture for the large- cap DOW remains bullish, while the Relative Strength is relatively strong. The index is holding above its 20-day MA of 12,594. Upper targets include the 14-day 70% RSI at 12,839.

The S&P 500 remains above some key multi-year resistance at 1,380 to 1,390 and recently broke out at 1,430. Near-term technical signals for the broadly based S&P 500 remain bullish, and the Relative Strength is relatively strong. The index is trading above its 20-day MA of 1,437. The near-term target is the 14-day 70% and 80% RSI at 1,471 and 1,517, respectively.

On the small-cap side, the near-term technical signals for the Russell 2000 — a barometer of small-cap performance and the economy — remain bullish. The Relative Strength is above neutral. The index is trading above its 20-day MA of 799 and well above its 200-day MA of 744. The break at 800 was bullish, as was the subsequent advance to 815. The upper target is the 14-day 70% RSI at 830.

Now, while the trends are positive and the near-term signals are bullish, watch for the overbought condition, as well as potential near-term selling pressure. This is not a big deal, as long as support levels hold. If they do hold, we could see higher gains in the near future.