Trend: The trend in US indices remains strong, following through on the strength that began last week. None of the indices or any of the 9 SPX sectors closed below even their 5-dma. This will be the first warning that weakness is afoot.
Commodities continue to beat expectations. The CRB closed the week at a 10-week high. Our recent theme has been that macro strength will be reflected in commodity prices, and so far that has in fact been the case.
Breadth: Cumulative breadth on the NYSE set a new high this week. This removed the negative divergence that had been present since October. The conventional wisdom is that "major tops" are preceded by a breath divergence. There was a new high in NYAD at the May 2011 top, before which SPX fell 19% over the next 4 months, so this would not preclude an "intermediate top."
Sentiment: Investor Intelligence bull/bear spread set a new 26-year high this week. AAII also expanded to a new 3-year high. Total put/call ratios have been below 0.6 most of this week. These are all extremes. The pattern is for SPX to retrace at least to its 200-dma (currently 10% lower) following such extremes (second chart).
Macro: Economic indicators have been surprising to the upside. CESI US and G-10 are both rising. Looking at durable goods orders versus SPX, one suspects that the market has more than anticipated positive data.
Railroad volume has been growing at 1.7% YTD versus 2012. It's worth noting that this is distorted by exceptional oil volume that is masking blasé volume growth elsewhere.
Now, enjoy another week of holidays. All the best to you in 2014.