While indexes closed little changed and mixed last week the underlying action remained positive as traders still believe an agreement will be reached to avoid the fiscal cliff. Index and indicator charts hold bullish. More important technically was the strengthening buy-sell stock breakout ratio. The recent slow but steady accumulation of new positions expanded and that building desire to own shares is what drives the market higher.
After a third week of gains the bulls were 45.7%, from 43.6 % a week ago and 37.7% with the mid-Nov lows. That last level showed the least optimism since mid-June. Lower readings for the bulls shows building cash on the sidelines and possible buying chances. In contrast, high levels suggest nearly fully invested positions which often occur near tops, but we are not there yet. Mid-Sep and Feb-12 both showed just over 54% levels. That means there is still room for more gains before the bullishness becomes a concern.