There’s no denying this broad based rally into northern territory. Lots of evidence suggests it has legs.

We’re going with a Buyer’s Caution bias. This rally has a real shot of sticking.

Bullish Technical Signals

• Broad Participation. Key sectors of technology, finance, transportation and Retail ac
• Buy Volume Bias. The S&P 500 notched in two accumulation days last week. The major indexes are showing a clear buy-side bias over the past month.
• Breakout. New highs on the major indexes raise odds that we’re in a later stage bull cycle. IF they stick.

Mixed Fundamental Reasons

• Favorable P/E levels, with regards to interest rates and inflation, are historically advantageous for many blue chips.
• On a Bearish Note, a multi-month decline in earnings growth isn’t what a Bull wants. Though a higher dollar valuation eroding profits from multi-nationals has a lot to do with this.

Sentiment

• Major media outlets are not making a big a deal over new highs, which is good as the media is usually behind the game.
• Lower risk bonds are the predominant strategy these days, potentially opening the door for equities as the less crowded play.
• Most people are uncomfortable buying new highs. Best trades are often uncomfortable to make.

No one would be surprised to see a test down to breakout levels. In which case it would be perfectly ok to exit, and consider a re-entry upon any resumption north.

It would also be just like the market to notch in a nice gain this summer, only to fall a part in the fall when fund managers return.