I realize, just based on the chatter around me that we are not supposed to discuss anything negative on the market. So, if you prefer, you can skip down a few paragraphs to the bullish stuff.
For the rest of you, the Dow did in fact trade right to the 12,500 resistance area -- and then it backed off. On a closing basis, the index can reach 12,550-ish and still kiss the line on the underside, but it's now in an area where we should expect some resistance the first time up.
Keep in mind that the longer-term chart of the Dow, dating back to 2007, connects to this trendline. So, for bulls, a move up above it would be big, as it would represent a breakout from a multiyear downtrend.
The S&P 500, at the current 1300 area, does not have the same sort of resistance as does the Dow. Still, as you can see from the chart, it too is coming into the area of resistance, with two trendlines hovering in the 1300 zone. So, for all of those folks screaming "breakout," I would note that it's a matter of which time frame and which chart.
That said, I was wrong to be so dismissive of the Russell 2000, since it did come roaring back Tuesday. Of course, it has yet to surpass its late-October highs around 770.
Of course, I prefer to pay attention to the statistics, and the number of stocks making new highs on the NYSE -- at 150 -- was nothing to write home about. Last week we saw 203, and there were 213 the week prior. Perhaps, with some backing-off from resistance and another rally later in the month, we'll be able to see new highs increase. But, in the past week, that has not been the case thus far. As someone noted to me, it's hard for new highs to increase when we've seen the S&P open on a gap and close below the open.
Now, as for breadth, the number was good, and the indicator moved to a higher high.
The Dow Jones Transportation Index broke out to a higher high, as well. That also goes on the positive side of the ledger.
The oscillator continues to look more like the November situation, when the market got overbought and then did not come down immediately.
In sum, I still believe the market needs a pullback, and that it should proceed to have another rally later in the month. When we looked at the put-call ratio of the CBOE Volatility Index (VIX) two days ago, I noted that it often took one to three days for that indicator to matter, and for a market response to kick in. So, now that we have seen a higher high with fewer stocks at new highs, I believe it's time for a short-term pullback. For the bulls out there, think of a pullback as allowing the market to get a running start.