No one can deny that many indicators look bullish right now. The bears are rapidly running out of real estate, and the Dow in particular is within a stone's throw of making new highs.
However, the burden of proof is now on the bulls. Anybody can run the market back and forth in a trading range, but until it breaks out, it's just range racing.
It's worth remembering that things looked fairly bearish a week ago, but bears failed to get it done when they needed to, as discussed on April 22:
I think one of the key trendlines right now is visible on a longer-term chart, and it's not too far below the current market. If that red trendline breaks, the market could start the next big leg down. If it doesn't break, the market should continue to bounce higher.
Bears were unable to break the red trendline, as shown below, which did indeed lead the market to bounce higher.
Now the market has reversed roles, and the onus is on the bulls. Things look fairly bullish (as they looked bearish recently), but the bulls now need to "prove it" by making new highs. Until they do, the danger of a bearish reversal can't be ignored.
The Dow chart illustrates the levels a little more clearly.
There are a few different ways to view the rally on this chart. The bearish view basically needs a top immediately. The bullish view suggests another new high, which would also invalidate the bear count. It seems reasonable to assume that if the bulls get a new high, then that will probably mark wave (1) of the larger (v) and at least a couple weeks of new highs would be forthcoming. It's also possible it would mark ALL of (v), but that seems less likely at the moment.
The SPX looks like it either has formed, or is very close to forming, at least a short-term top. It's completing either its C-wave or first wave up.
Zooming out a bit, the SPX counts look like this:
The advantage the bulls have, of course, is that they are continually backstopped by the Fed, whose goals of making the dollar worthless have, thus far, largely been successful. A worthless dollar makes everything else worth "more" in dollars: from stocks to precious metals, to oil/gas and food. So it seems like things are going up in value, when in actuality the dollar is simply going down in value.
In reality, it's a zero-sum game that only damages the American public with higher prices. The upside is that we all "feel better" about things while they're doing it.
However, I propose that the Fed should at least buy us all a nice dinner. And I'm talking about a good restaurant, no greasy spoon joints. I think this is only common courtesy, as the majority of us Americans appreciate being taken to a nice dinner before getting royally screwed.
Of note, the Fed recently announced a new motto, which I think is a sad, but excellent, example of Truth in Advertising:
The Federal Reserve: Saving the World Daily by Destroying America