Good Morning, Traders. A step in the bullish direction yesterday as the S&P and Nasdaq made new highs for the year and are now testing levels not seen in almost 5 full years. Which brings us to the chart above. Sometimes when we are caught up in the daily action of the markets, daytrading, swing trading, whatever our modus operandi is, we fail to take note of what is happening in the really big picture, that being where the markets are when looked at over years and not days or months. In order to get a good grip on where we are in terms of range, we have to look at monthly charts. Two things should be noted in the chart above. Firstly, the fact that we are now testing an area which was a top in the spring of 2001 that was the genesis of a rather nasty selloff that culminated in the last wave of the bear market that defined the deflation of the "bubble". Yesterday's high of 1312.81 in the SPX took us just shy of that May 2001 level, whose high was 1315.93. So we know going forward that we have an important pivot ahead of us. The second thing to note on the monthly chart above is that we have not had a red bodied candle in over 5 months. We are in the sixth straight month of advances where the market has moved to a new high that was at least slightly higher than the high of the previous month. So although it feels like the market is advancing in a rather herky jerky manner, with the indices out of sync, lets keep in mind that according to the monthlies an entire month of correction could easily occur here and still leave this much longer term pattern intact. If that is to happen remains to be seen, The Big Picture is just pointing out that the odds of such correction greatly increase when the market moves to a an area that was a prior top as it is doing now.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.