The main story for January, frequently discussed on our blog, was the price divergence between the NDX on the one hand, and the DJIA & SPX on the other. While the former was confined all month long to a narrow trading range, the latter were making new highs almost every day of the month.

From a broader perspective, the Qs have been stuck in a trading range since February 2012:

An optimist may view this as the stock building a base and gathering steam to break above the 50% retracement from the 2000 highs. For a realist, the stock is in a relatively weak position and, coupled with the inability of tech stocks to lead the rally, this may spell trouble for the days and weeks ahead.

As mentioned all throughout the month of January, the SPX's performance continues to be consistent with previous reactions to similar monetary policies from the recent past. The January target was succesfully met and the index made new highs on the first day of February:

As long as price remains within the channels and above key support levels, the trend is up and higher prices are to be expected.

In summary, while we remain bullish on the SPX and the DJIA, we will keep a very close eye on the Qs for signs of trouble ahead.