I promised myself I would not comment on the triangle pattern in the major averages again, since in my view it is now almost comical: Everyone sees this pattern. I will continue to note that, should we see a breakout in either direction this week -- that's accompanied by confirming statistics -- we should pay attention to it.
On Tuesday stocks managed to rally despite what was going on in Europe, and also despite the rising dollar. When was the last time we saw stocks climb on a day the dollar was strong? That is resilience.
More to the point of resiliency was the move in bond yields in Europe, which the market managed to ignore. The chart below shows a surge in French bonds in the last few days to levels beyond what we saw last summer. They are now pushing to the spring highs.
The good news for stock bulls is that yields are pushing up against previous highs, which will often tend to act as resistance the first time up at those levels. The bad news is that, if we do a back-of-the-envelope measured target, we come up with a yield of approximately 4.5%.
Since we have already seen Spain's yields climb above 6% and Italy's climb over 7%, perhaps 4.5% doesn't seem that bad! However, relative to Germany's meager yield -- at just under 2% -- that is quite a spread. For now, the stock markets do not seem to care.
What is even more amazing to me is that the French stock market hasn't fallen apart. Folks seem so enamored with U.S. stocks, and the talk is that the U.S. is much better off than Europe (which I believe, as well). But if Europe is in such bad shape, and if French bond yields are soaring, shouldn't the CAC already be well under 3000 by now?
Back in the U.S. markets, we should continue to monitor the number of stocks making new highs. Tuesday's reading was 52, which most would say isn't great. I am actually going to give that reading a bit of credit (although not much!), since Friday's reading was 53 and the S&P 500 didn't even make it to Friday's intraday highs.
An unimpressive move would be if a breakout accompanied by fewer than 174 stocks at new highs on the NYSE. 174 new highs is the reading we had back in late October, when the S&P was up at 1285. What would be outright negative would be fewer than 75 new highs, since that was the reading we saw on Nov. 8, when the S&P was at 1275.
In the meantime, the sentiment continues to vacillate between cheerful on up days and downbeat on down days, so I continue to see no giddiness thus far. A breakout to the upside could change that, but for now it hasn't.