In terms of price development, it is common for a Stock Index or an individual Stock to run, then pause, then run again in all degrees of time. From the Low the Stock Indices made in March 2009 there have been varying degrees of runs and pauses. This culminated in a move to new highs in the S&P in December of last year.
The Indices, as represented by the chart of the S&P below, paused. That pause saw a simple rotation from the beginning of December to the end of January of this year.
This chart represents a distribution of trading the S&P for the period of December 8, 2016 through January 24, 2017. Simply put, each time the S&P reached the 2275 area, buyers stepped back and selling took over. However, on the other hand, each time the S&P reached the 2225 area, buyers stepped back and drove price back up. There was literally no incentive for price to move above or below either area.
As you can see from the above chart, as time progressed into 2017, the range of trading in the S&P was tightening around the 2065 area. Each day the range was smaller and smaller. This tightening typically signifies pent up energy in a market and the potential for a breakout in one direction or the other. That breakout occurred on January 25 with the S&P exploding above the 2275 area.
After the breakout, there was another three-day pause and then a retest of the breakout, which is typical. Then, on Friday February 3, the energy again erupted in the Stock Indices and new highs were once again achieved.
What is important from here will be to watch the area of 2275 in the S&P. If the Stock Indices and Stocks in general are in the process of another leg higher, then the S&P should not trade or close back below the 2275 area again. If it does, then it suggests buying strength may not be strong enough to accelerate higher and the potential to rotate back through the range will have increased. This could result in a possible test of 2225.
Unless or until the above occurs, the trend is up in Stocks. As of last week, up volume was increasing. Market Breadth was strengthening. New highs increased and the Advance Decline Ratio exploded higher. There will always be shorter term pauses in every move, but as long as the 2275 area holds as support, investors and traders should be leaning toward the long side of the market.