Stocks continue to coast higher. Traders are buying the dips just as fast as they can. The parade of positive economic data in the U.S. certainly helps grease the wheels for this bull market. Last week's Philly Fed survey was very impressive. Economists were only expecting a small increase from 19.3 to 21.0 but February saw a surge to 35.9. This was a seven-year high for the Philly Fed survey.

On Friday the market's midday swoon was sparked by news that China had raised their bank reserve requirements yet again. This time by another 50 basis points. This pulls money out of the system, which is supposed to slow down loan growth and thus slow down the economy. Investors were briefly worried that it would slow down demand but worries did not last long and stocks rebounded into Friday's closing bell.

This past week saw cotton prices surge to multi-decade, and apparently all-time highs on huge demand from China. Several agricultural commodities continue to rally and metals were holding up too. Gold and copper were marching higher but silver prices were sprinting to new 30-year highs. In addition to mining stocks the steel stocks were seeing some strength last week. Inflation concerns remain front and center on the global stage but they're not big enough (yet) to slow down the stock market rally.

Bloomberg reported that the S&P 500 has rallied to new 32-month highs. The index is also up +100% from its early 2009 bear-market lows. Last week I suggested that the next hurdle could be the 1350-1365 zone. That hasn't changed. No one knows if and when the next correction will occur or how deep the correction will be when it happens. Typically the farther we stretch the rubber band the harder and faster it snaps back. In the meantime, while we wait for the rubber band to snap, traders remain poised to buy the dip.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

This past week the NASDAQ composite bounced from a test of broken resistance near the 2800 level. This index appears to be on a collision course with its 2007 highs near 2861. There is no reason to suspect it won't get there.

Daily chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index:

Nothing has changed for the SOX semiconductor index. This high-profile technology sector continues to rally inside its bullish channel. Last week I made note that the SOX was rising without much help from its biggest component Intel. Well now Intel (INTC) is starting to participate, which could keep the rally going.

Daily chart of the SOX semiconductor index:

The Russell 2000 has seen three strong weekly gains in a row. This small cap index looks like it's headed for the next level of resistance near 850-855 dating back to 2007. At this pace the Russell 2000 could be there before the end of the month. If something did spark a pullback I would watch for the $RUT to find support near 800 and its 50-dma.

Daily chart of the Russell 2000 index:

Weekly chart of the Russell 2000 index:

The transportation sector continues to rally, which is important for Dow Theory followers. The breakout last week is bullish and we could see this sector challenge its all-time highs in the next couple of weeks.

Weekly chart of the Dow Jones Transportation index:

The economic calendar this week is not quite as packed as last week's. There will be plenty of lagging data on the housing market with the Case-Shiller 20-city price index data from December, the existing home sales for January, and January's new home sales. We'll hear the February consumer confidence numbers, which should tick higher. Durable goods orders are expected to turn positive from a drop in December. On Friday we will get the latest estimate on Q4 GDP, which could tick higher to +3.3%. This week we could also hear analysts start looking ahead to the next jobs report just two weeks away on March 4th where current estimates are for the headline number to surge to +170,000 new jobs.

Overall almost nothing has changed from last week. Stocks are marching higher no matter what the headlines. Economic data continues to come in positive. Investors are currently ignoring the spread of protests across the middle east, some of which have started to turn violent. The markets are also digesting news of rising inflation. On a short-term basis the U.S. dollar looks poised to decline, which would further fuel the rally in commodities.

I am also hearing more chatter about the "unknown" or "unforeseen" catalyst that will reverse this market. Without the wall of worry that bull markets like to climb, some traders may feel uncomfortable. That is certainly understandable. The boogey-man is a lot less intimidating when you know his name. If the stock market is any indication then investors are feeling pretty fearless right now.

There are a lot of traders, both big and small, who are praying for a real dip lower so they can buy it. Thus pull backs will likely remain shallow until we do hit something unexpected. Yet even then the decline will probably prove to be an entry point. In this environment I would focus on managing your capital so that when the opportunity (correction lower) does occur we will have money available to buy the dip.

- James