Greece leaving the euro, war in the Ukraine, and lousy Retail Sales data could not keep the stock market down last week. In this week's technical review, I point out that several of the major averages have staged marginal upside breakouts, but most market analysts are not impressed. Instead the focus seems to remain on how much the stronger dollar has hurt earnings, which they feel do not justify the current high levels of the major averages. Others are worried about what type of ripple effect the low crude oil prices will have on the economy. Many may wait for the preliminary reading on GDP that is due at the end of the month. As I discussed in Barron's Roundtable-Too Cautious Like 2013? the bullish panelists are only expecting gains of 10% or less. Many seem to think that the market needs a 15-20% correction to get in line with the fundamentals. Others remain convinced that, as one analyst said, "Stocks will be 'ripped to smithereens,'" or that are already in a recession or bear market. In the most recent trading lesson Tell Tale Signs of a Correction I took a look at what type of warning signs we typically see before a 15-20% market correction. I concluded that we currently do not see such warnings but that did not rule a 5-10% market correction. With this week's strength, a 5-10% correction is looking less likely, but a convincing upside breakout will make it even less likely. I have not seen anyone discussing the potential for stocks to melt up from current levels. This could be a rally like we saw in 2013 when the Spyder Trust (SPY) was up over 32%. If we get a confirmed breakout, a 3-6 week rally to significant new highs is likely, which would clearly surprise the majority. In a December column (Is the Bull Market Only Half Over?) I discussed the following quote from Sir John Templeton, "Bull-markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria." If we are in this type of bull market now, we have not yet reached the optimism phase.
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