"Victory!" Cheers and shouts of joy, happiness, and jubilation echoed across Egypt on Friday as President Mubarak signaled he would step down and beat a hasty retreat out of town. I hear a similar echo of victory from the stock market bulls. Yes, dear readers, the bulls have "won". This market has continued to climb no matter what the headlines are. Hugely disappointing jobs report? No problem. Regime change in one of the Mideast's most prominent players and an ally to the U.S.? No problem. It doesn't matter if the headlines are good or bad, this market continues to climb. Yet like the citizens of Egypt, traders may be wondering what now? What next?

Bull markets tend to climb a wall of worry. It seems we have nothing left to worry about. The market isn't reacting to our stagnant labor market and lack of any real job creation. The market isn't worried about rising inflation. The market has forgotten about Europe's credit crisis. Currently the picture looks pretty rosy for Wall Street. The Federal Reserve remains focused on their QE2 program, which makes equities look more attractive than bonds. Meanwhile corporate profits are improving with 73% of the S&P 500 companies beating estimates. Traders are being lulled into a greater sense of complacency, evident in the VIX volatility index slipping toward multi-year lows. This, dear reader, is worrisome.

I'm not trying to paint a bearish picture. With the U.S. stock market's major indices breaking through significant resistance I'm not sure I could paint a bearish picture even if I wanted to (and I don't want to). The problem is what will the market focus on next? Without some sort of focus, then stocks might start to just drift sideways. That would not necessarily be a bad thing. Consolidations don't always have to be downward. The market can consolidate sideways as it digests previous gains.

I was talking to Jim Brown this weekend. Both of us independently came to the same conclusion. In this environment, with stocks rising on both good news and bad news, it will take something totally unexpected to shock the market. I'm not trying to be chicken little proclaiming the sky is falling when it's not. I merely want to caution you that it's tough to plan for the unexpected. If we are lucky then maybe the market's collective attention will return to one of our current issues like the lack of job growth in the U.S. or China raising interest rates as they try to slow down their economy, or Europe's still struggling debt-laden PIIGS countries, or rising inflation across much of the globe. It seems like every other day I hear about corn, or sugar, or cotton, or copper hitting some new high. It's possible the markets will return their focus to the residential foreclosure problem in the U.S., which remains a huge issue for the housing market. In the meantime, bulls are in control and the market's trend is up. I would say "enjoy it" but I don't want investors to get too comfortable.

The S&P 500 index has continued to knock down one resistance level after another. I suspect the next hurdle is in the 1350-1365 zone. On a short-term basis this index has been bouncing on dips near the rising 10 or 20-dma. Odds are good that broken resistance at the 1300 level will be decent round-number, psychological support.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

The tech-heavy NASDAQ composite continues to climb and just broke out over round-number resistance near the 2800 level on Friday. The next level of potential resistance are the 2007 highs in the 2825-2860 zone.

Daily chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index:

The SOX semiconductor index remains in a strong and steady channel higher. Last week I warned you that eventually this pattern is going to break but until then the trend is up! The challenge is trying hard to find a semiconductor stock that isn't so overbought you can still buy it. What is even more impressive is that the SOX has been rising with Intel (INTC), its biggest component, underperforming. Right now INTC is consolidating sideways under resistance near the $22 level. What happens if/when INTC breaks out higher?

Daily chart of the SOX semiconductor index:

The small cap Russell 2000 index has gone from a laggard and potential anchor for the market back to being a leader. The $RUT has broken out to new three-year highs. On a short-term basis the bottom of its prior channel might be resistance but the trend is definitely up. Bigger picture the 2007 highs near 850 will likely be a challenge but that's 30 points away!

Daily chart of the Russell 2000 index:

Weekly chart of the Russell 2000 index:

Last week I pointed out that we should be concerned because the Dow Jones Transportation average was not participating in the rally any longer. This is no longer a concern. The sideways consolidation in the transports narrowed and the bulls were victorious! The index has broken out higher and rushed straight toward its January highs. A failure here might look like a potential bearish double top but for now the momentum is up. Longer-term the transports could face steep resistance near the 5500 level. A rise past 5500 would be new all-time, record-breaking highs.

Daily chart of the Dow Jones Transportation index:

Weekly chart of the Dow Jones Transportation index:

This coming week we have a very full economic calendar. Monday is quiet but Tuesday, Wednesday, and Thursday are very full. We'll hear the January retail sales, New York Empire manufacturing index, import/export prices, December's business inventories, housing starts and building permits for January, the Producer Price Index (PPI) and Consumer Price Index (CPI) for January, weekly jobless claims, leading indicators, and the Philly Fed report for February. The big events there are probably the PPI and CPI since economists have been growing worried about rising inflation. Of course we've had very low inflation for a long time so a pick up in inflation would probably be normal here. What's not on the list is the FOMC minutes from the last meeting and these will be released on Wednesday.

In summary, am I bullish on the stock market? Yes, I am. Would I want to launch new long-term six month to eighteen month trades with the major averages at two and three-year highs? That prospect is a lot less enticing. Until we see some sort of consolidation and/or correction in stocks we might want to scale back our trade size and shorten our time horizon for our trades (and probably tighten stops too). If we can limit our risk then maybe we can take advantage of some of these bullish breakouts that are becoming so common these days.

While bulls take a victory lap around the stock exchange I am curious to see what the next crisis will appear on the horizon. Something needs to provide the next flight of stairs in the wall of worry. The successful protests in Egypt have inspired millions and demonstrations are being planned across the Mideast for those seeking change. We all know that change can be uncomfortable and the one thing the stock market hates the most is uncertainty.

- James