Charts below text.

Globex was positive overnight and the indices are on/near their highs as this is being written. There are important exogenous events this week that will likely serve as catalyst for market movement and an increase in volatility. There are two critical relationships involving the stock indices to watch as we begin the week.

1) The relationship to the Russell 2000 tothe S&P/Dow. If the Russ 2k/TF closes above Thursday’s high there is little resistance left before new highs in that index. Be cautious about being short of favoring shorts if the Russ begins to show strength. Check that, DON’T favor shorts if the Russ starts showing strength.

2) Related to the above, watch Breadth and the Price/breadth relationship if the S&P/ES makes a sharp stab to new highs. As I have pointed out many, many times, it is NORMAL in strong bull trends to have a series of divergences form between price and Breadth between Initiative legs up in a bull trend. It is especially important to monitor this relationship in real time with the indices (Russ, Dow and S&P) at or just below all-time highs.

It should be an interesting week with lots of opportunity. Don’t predict; TRADE.