Despite Wednesday’s stock market weakness, selling remains contained. Round-number resistance-turned-support levels at 13,000 on the Dow, 3000 on the Nasdaq, and 1400 on the S&P 500 have held up. The S&P was the last to breakout and the first to test support. In fact, it has been testing support at 1400 almost every day since it broke out two weeks ago.

After last week’s technical breakout on elevated volume, stocks have flattened and trading volume has waned as investors seem to be waiting to see whether there will be a pullback to test new support levels and the bulls’ conviction. I think the bulls are plenty convicted—not conflicted.

Stocks are finally showing a willingness to ease up on their bull run, if for no other reasons than to do some much-needed technical consolidation and to digest the latest news. You might say they are pausing to take in the view from these lofty heights—especially the Nasdaq, which hasn’t seen this level since 2000...when it was moving rapidly in the other direction.

The stock market is behaving extremely well from a technical perspective. And why not? The world seems stable enough to give investors the confidence to maintain a “risk-on” allocation. Sure, there is still plenty to worry about. But more and more, investors are growing bolder. The Dow is at its highest level since 2008 and wants to challenge 13,000. The Nasdaq is at its highest level since 2000. 

The stock market has continued its bullish ways—thanks to indications of an improving U.S. economy and diminished concerns about Europe’s economic stability. The S&P 500 finished January up +4.4%, while the “riskier” Nasdaq finished the month up 8.0% and the MSCI Emerging Markets Index gained 7.7%. Yes, investors are boldly embracing the “risk on” trade.