May 8 Daily Market Assessment

Slow down; yellow light ahead!

With recent gains, the U.S. markets have confirmed their primary uptrend. Specifically, the Dow industrials and the Russell 3000 have carved out all-time highs, while the Nasdaq and the S&P 500 have each notched six-year highs. And while a near-term pullback is a little bit overdue, the more important longer-term trend remains higher.

After holding support last week around 1,475, the S&P has spiked to six-year highs, clearing the 1,500 mark for the first time since September 2000. From current levels, first support holds at former resistance around 1,498. Meanwhile, the Dow industrials notched another all-time closing high on Monday, ending at 13,312. Furthermore, recent pullbacks have been unusually shallow, creating tight trading ranges at progressively higher levels. That means despite its steep rally, sellers remain conspicuously absent, even with Tuesday's yo-yo down and up day.

All of that notwithstanding, it's time to issue a caution signal. CSCO and DIS disappointed somewhat on Tuesday, and the Fed is going to issue some blather about inflation being a concern. I suspect that this will be enough to bring the sellers back into the market, and I look for at least two distribution days this week.

Summary: Still bullish long-term, and bullish short-term as well (but with tight stops)