Equities continue to be unphased by either overbought readings or advances by the dollar. The SPX set new closing and intraday highs for the rally out of the February low, while tech stocks set new closing and intraday highs for the entire rally out of last March, following small caps which did so last week. At some point, though, stocks are going to have to at least pause to work off excesses before entering what I expect to be a blow-off phase for the cyclical bull.
Given the congestion zone, a multitude of overbought readings, and two rally legs of roughly equal height, traders should not be surprised to see the stock advance temporarily stall. However, I will reiterate that all signs point to higher prices after we work off overbought conditions. The facts that stocks keep pushing higher in the face of those overbought readings and that tech and small caps are leading higher both suggest a very bullish tone.
Another positive sign was the ability of precious metals to hold up this morning in the face of a rally in the DX. After slumping briefly, both gold and silver recovered nicely.
Obviously any pause or retreat by equities here would likely temper silver's advance. My suspicion is that all markets will fall into limbo as traders await the babble that will come out of next week's FOMC meeting. Once the Fed shows its willingness to keep the presses rolling, the consolidations will end, and the exciting phase of this rally will commence.