Steady going for the stock market this week, as the S&P 500 remains comfortably above its 2090 breakout area. "Known Sure Thing (KST)" remains solidly in positive territory. ITs most recent peak above 40 preceded a 5% pullback in December. While the KST indicator sits near 30, we don't see an extreme in tis reading yet.
Low levels of VIX tend to precede periods of complacence and risk of a setback in equities. Vix is approaching that risky low level, falling to almost 20% below its 50-day moving average. We'll need to watch this one:
As for market breadth and internal strength, advance-declines and new highs vs. new lows remain healthy, despite weakness recently in the S&P 500 high-low ratio. Another positive continues to be the summation index, which remains firmly in bullish territory above 400 and broke above its recent high near 600:
Our final chart looks at macro-economic and sector relationships. The first is the ratio of LQD (iBoxx Corporate Bond Index) vs. IEF (10-Year Treasury Bond). We have seen a recent bullish breakout in February, an impressive turn of events from the downtrend that stretched from October 2014.
As for other economic indicators, we view copper and its ratio to Treasuries as a signal of economic strength. This relationship has been in a bearish mode since October, but recently has seen some upside, albeit not very convincing. The major driver of this relationship is the strong dollar and its affect on commodity prices. Finally, small caps have outpaced large caps, and discretionaries are beating staples, further bullish ammunition for equities.
Bottom line, technical conditions continue to favor an emphasis on equities.