I teach a college class on Technical and Market Analysis. The class is for seniors and introduces a form of analysis that flies in the face of much of what they were taught in the prior three years. I tell the students they don’t have to get caught up in balance sheets and income statements. They don’t have to change their views with every new narrative. I simply tell them their goal is to determine who is in control—and how likely they are to stay in control.
Right now, the bulls are in control.
S&P 500 and NASDAQ 100
Both the S&P 500 and NASDAQ 100 closed higher last week, following through on their impressive performances during the prior week. Both are a stone’s throw from new all-time highs and remain solidly above their rising 60-week moving averages.
Source: Optuma
S&P 500 Equal Weight Index
The two indices above garner most people’s attention, but they’re not what stands out the most to me this week. I’m most impressed by the performance of the S&P 500 Equal Weight Index. We all know that the S&P 500 and NASDAQ 100 are capitalization-weighted, so they benefit from passive flows.
However, the fact that the S&P 500 Equal Weight Index is already trading at record levels speaks to underlying equity strength. Said differently, the average stock is at record levels—so market strength is likely broad.
Source: Optuma
New Highs vs. New Lows
On the NYSE, new highs have remained persistent since the April trough. Outside of short term moves, sustained upticks in new lows have been nonexistent since that April spike.
Source: Optuma
Dow Jones Transportation Average
The Dow Jones Transportation Average makes frequent appearances on these pages because it’s a key player in the work. Readers should be well aware that this average has been strong of late.
The strength here seems to be overlooked by many in the market, likely because it hasn’t made any progress in four years.
Source: Optuma
Final Thoughts
The bulls remain firmly in control. Major indices are near all-time highs; breadth is strong, and equal-weight performance confirms that strength is broad-based—not just concentrated in mega-cap names.
Until these conditions change, the path of least resistance remains higher.
Dan Russo, CMT
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